l>EC 200 Practice problems - Supply and Demand

If the good is storable, and an increase in price is expected, consumer will want to to buy the great today, before the price increases. As a result, the existing demand because that the great increases, which outcomes in an increase in the price of the an excellent today. Check out graph.

2. The dryness in the plain states has made grain, and also therefore feed, quite expensive. Countless ranchers cannot afford to feed your cattle, and have sold lot of their herd because that slaughter. A. What will certainly be the immediate effect of this event on the equilibrium price and also quantity of beef? illustrate using a supply and demand diagram. Slaughtering the cows will result in boost in the it is provided of beef to the market, i beg your pardon will consequently lead to a decrease in the equilibrium price the beef and an increase in the equilibrium quantity of beef. Check out graph.

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market for beef

b. Chicken and beef room substitute goods. Highlight the effect that the slaughter the the livestock herds will have on the equilibrium price and quantity the chicken. together the price of beef decreases, consumers will buy much more beef and less chicken. The demand for chicken will certainly decrease, bring about a to decrease in the equilibrium price and also quantity the chicken. View graph.

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industry for chicken c. As it happens, the slaughter that beef livestock has corresponded with a decrease in consumers" income. Assuming that steak is a normal an excellent while hamburgers space an worse good, use a supply-and-demand diagram for either sector to show the merged effect that the two abovementioned events top top the equilibrium price and also quantity of hamburgers and steak. together consumers" income decreases, the demand for normal items (such as steak) decreases if the demand for inferior goods (such as hamburgers) increases. Keep in mind that our conclusion from part a is quiet valid. A lower price of beef will boost the supply of all goods in i beg your pardon beef is an input. Because of this in each of the two industries in question we attend to simultaneous move in supply and demand.

Steak: S increases, D decreases.

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

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3. Assume that the sectors for sugar cane, rum, and also whiskey are initially in equilibrium. Assume more that Hurricane Marilyn destroys lot of the Jamaican sugar cane crop. Sugar cane is a major ingredient in rum, however it is no an ingredient in whiskey. Analyze the impact of the hurricane ~ above the markets for each of the 3 goods. Explain using graphs.


Step One - The industry for sugar cane The Hurricane results in a diminish in supply (at any type of given price, sellers space no much longer able to provide as lot cane together they offered to). As a result, the equilibrium price of street cane will certainly increase, and also the equilibrium amount will decrease. View graph.

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Market because that sugar cane

Step 2 - The market for rum street cane is a major ingredient in rum, and also it is now much more expensive. Boost in the price the inputs causes a to decrease in supply. Together a result, the equilibrium price that rum will increase, and also the equilibrium amount will decrease. The graph will certainly be similar to the one above.

Step three - The industry for whiskey the is reasonable to assume whiskey and rum room substitutes. Rum is now an ext expensive 보다 it supplied to be (see action Two). As a result, much more consumers will certainly buy whiskey instead. This will cause an increase in the demand for whiskey, which leader to greater equilibrium price and also quantity the whiskey. View graph. Sector for whiskey