l>EC 200 Practice Problems - Supply and Demand

If the great is storable, and an increase in price is meant, consumers will desire to buy the great now, prior to the price rises. As a result, the present demand for the excellent rises, which results in a rise in the price of the excellent this day. See graph.

2. The drought in the ordinary states has actually made grain, and also therefore feed, rather expensive. Many type of ranchers cannot afford to feed their livestock, and have actually marketed a lot of their herd for slaughter. a. What will certainly be the immediate impact of this event on the equilibrium price and also quantity of beef? Illustrate using a supply and demand diagram. Slaughtering the cows will certainly bring about an increase in the supply of beef to the industry, which will subsequently bring about a decrease in the equilibrium price of beef and also a boost in the equilibrium quantity of beef. See graph.

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Market for beef

b. Chicken and beef are substitute items. Illustprice the effect that the slaughter of the cattle herds will have actually on the equilibrium price and also amount of chicken. As the price of beef decreases, consumers will certainly buy more beef and also much less chicken. The demand for chicken will decrease, bring about a decrease in the equilibrium price and amount of chicken. See graph.

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Market for chicken c. As it happens, the slaughter of beef cattle has synchronized with a decrease in consumers" income. Assuming that steak is a normal great while hamburgers are an inferior good, usage a supply-and-demand diagram for either market to illustrate the linked effect of the 2 aforementioned events on the equilibrium price and also amount of hamburgers and steak. As consumers" income decreases, the demand for normal products (such as steak) decreases while the demand for inferior products (such as hamburgers) boosts. Keep in mind that our conclusion from part a is still valid. A lower price of beef will certainly boost the supply of all items in which beef is an input. Because of this in each of the 2 sectors in question we address simultaneous shifts in supply and demand.

Steak: S increases, D decreases.

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Hamburgers: S rises, D increases.
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The price of steak will certainly decrease. We cannot say for sure what will happen to quantity, since that will depend on the relative magnitude of the two shifts. The equilibrium amount of hamburgers sold will boost. We cannot say for sure what will certainly take place to the equilibrium price of a hamburger, given that that will depfinish on the relative magnitude of the 2 shifts.

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3. Assume that the markets for sugar cane, rum, and whiskey are initially in equilibrium. Assume even more that Hurricane Marilyn destroys much of the Jamaihave the right to sugar cane crop. Sugar cane is a major ingredient in rum, but it is not an ingredient in whiskey. Analyze the effect of the hurricane on the markets for each of the 3 goods. Exordinary using graphs.


Tip One - The market for sugar cane The Hurricane results in a decrease in supply (at any kind of offered price, sellers are no much longer able to provide as a lot cane as they provided to). As an outcome, the equilibrium price of sugar cane will certainly rise, and the equilibrium quantity will decrease. See graph.

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Market for sugar cane

Tip Two - The industry for rum Sugar cane is a primary ingredient in rum, and also it is now more expensive. An increase in the price of inputs causes a decrease in supply. As a result, the equilibrium price of rum will rise, and also the equilibrium quantity will decrease. The graph will be equivalent to the one above.

Step Three - The industry for whisessential It is reasonable to assume whiscrucial and also rum are substitutes. Rum is now even more expensive than it used to be (watch Step Two). As an outcome, even more consumers will buy whisvital instead. This will certainly reason a rise in the demand for whisvital, which leads to higher equilibrium price and also quantity of whisvital. See graph. Market for whiskey