UNIT ONE (FOR EXAM ONE)
Unit One--Assignment Two--Problem 3 from page 78
UNIT ONE (FOR EXAM ONE)
Unit One--Assignment Two--Problem 3 from page 78
3. It has just been reported that eating meat is bad for your health. Using supply and demand curves, demonstrate the report's likely effect on the price and quantity of steak sold in the market.
Set up a supply and demand sketch graph by labeling the vertical axis P and the horizontal axis Q. Then draw in a downward sloping demand curve and label it D. Sketch in an upward sloping supply curve and label it S. Mark the intersection of supply and demand as E1. Then draw a line parallel to the x-axis directly over to the vertical axis and label this P1. Now draw a line parallel to the y-axis directly down to the horizontal axis and label this Q1. This is the standard format for a sketch graph. After you make a shift of the supply or demand curve, the new intersection point of supply and demand should be labeled E2. The associated price and quantity may be labeled P2 and Q2 and you’re done!
Make only one shift for this question. First decide whether the primary impact is on the demand side or the supply side. If you decide that a demand shift is called for, then determine whether the shift is out to the right, an increase in demand, or back to the left, a decrease. Alternatively, if you believe that the supply curve should be shifted, then decide whether the shift is to the right, an increase in supply, or back to the left, a decrease in supply.
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