l>EC 200 Practice problems - Supply and Demand

If the an excellent is storable, and rise in price is expected, consumer will want to to buy the good today, prior to the price increases. Together a result, the existing demand because that the good increases, which results in an increase in the price that the great today. View graph.

2. The dryness in the plain states has actually made grain, and therefore feed, quite expensive. Many ranchers can not afford to feed their cattle, and have sold much of your herd because that slaughter. A. What will certainly be the immediate effect of this occasion on the equilibrium price and also quantity the beef? show using a supply and also demand diagram. Slaughtering the cows will result in rise in the supply of beef to the market, i beg your pardon will consequently lead to a decrease in the equilibrium price that beef and boost in the equilibrium quantity of beef. Watch graph.

sector for beef

b. Chicken and beef are substitute goods. Show the result that the slaughter the the livestock herds will have actually on the equilibrium price and also quantity of chicken. together the price the beef decreases, consumers will buy much more beef and less chicken. The need for chicken will decrease, leading to a diminish in the equilibrium price and also quantity the chicken. Watch graph.

industry for chicken c. As it happens, the slaughter of beef livestock has coincided with a diminish in consumers" income. Assuming that steak is a normal great while hamburgers space an inferior good, use a supply-and-demand diagram for either market to highlight the an unified effect the the two previously mentioned events ~ above the equilibrium price and also quantity that hamburgers and also steak. together consumers" income decreases, the need for normal products (such as steak) decreases while the demand for inferior goods (such as hamburgers) increases. Keep in mind that our conclusion from component a is still valid. A lower price of beef will boost the it is provided of all goods in i beg your pardon beef is one input. Thus in each of the two sectors in concern we address simultaneous move in supply and also demand.

Steak: S increases, D decreases.

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Hamburgers: S increases, D increases.
The price the steak will certainly decrease. Us cannot to speak for certain what will occur to quantity, since that will depend on the relative magnitude that the 2 shifts. The equilibrium amount of hamburgers marketed will increase. We cannot to speak for sure what will take place to the equilibrium price of a hamburger, since that will rely on the loved one magnitude that the two shifts.

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3. Assume that the industries for sugar cane, rum, and whiskey are initially in equilibrium. Assume additional that Hurricane Marilyn destroys much of the Jamaican street cane crop. Sugar cane is a primary ingredient in rum, yet it is no an ingredient in whiskey. Analysis the result of the hurricane ~ above the sectors for every of the 3 goods. Define using graphs.

Step One - The sector for sugar cane The Hurricane results in a to decrease in it is provided (at any type of given price, sellers space no much longer able to provide as much cane together they offered to). Together a result, the equilibrium price of street cane will increase, and the equilibrium quantity will decrease. See graph.

Market because that sugar cane

Step 2 - The market for rum sugar cane is a primary ingredient in rum, and it is now an ext expensive. Rise in the price of inputs causes a diminish in supply. As a result, the equilibrium price the rum will certainly increase, and the equilibrium quantity will decrease. The graph will certainly be comparable to the one above.

Step 3 - The industry for whiskey the is reasonable to i think whiskey and rum space substitutes. Rum is now more expensive 보다 it provided to it is in (see step Two). As a result, an ext consumers will buy whiskey instead. This will certainly cause rise in the demand for whiskey, which leader to higher equilibrium price and also quantity of whiskey. See graph. Industry for whiskey