Question

1.Given the following solutions, define if price equilibrium and quantity equilibrium increase or decrease as well as graph each of them in relation to the market for coke:

a) bad weather wreaks havoc with corn crop (main ingredient for coke)

b) the price of Pepsi (a substitute) rises dramatically:

c) increase in the umber of coke suppliers in the market

2. For each question indicate whether there is a shift in supply or demand, what happens to price and what happens to quantity.If possible draw a graph for the supply and demand curve showing the change in Quantity and Price Equilibrium.Each case is independent of one another

a) The surgeon General announces that cigarettes: A)do not cause cancer and B) Prevent arthritis.Show how this affects the market for cigarettes.

b) as the recession continues, family incomes continue to fall.Shoe how the effects of this in both the market for tea and coffee.

d) the price of flour falls .Show how this affects the market for bread.

e) As prices of electricity and natural gas rise, what is the effect on the market for firewood?

f)Many homeowners associations restrict the use of television antennas or satellites dishes.How does this affect market for cable television?
3.The next set of questions concerns the market for U.S grown cotton.For each question ,indicate whether there is a shift in supply or demand what happens to price and what happens to quantity.If possible draw a graph for the supply and demand curve showing the change in Quantity and Price Equilibrium.Each case is independent of one another.

a) Wages of cotton field hands increase sustainability.

b) Excellent new synthetic fabrics are developed for making clothes.

c) The supply of shepherds declines dramatically because of better job opportunities in the cities.

d) improvements in the cotton gin make ginning less costly.

e) The cotton growers association conducts a successful advertising campaign to persuade people that cotton shirts are extremely comfortable.

f)A new chemical is discovered that can be added to cotton at an insignificant cost to make ironing of cotton shirts unnecessary.

Answer 1

PART-1)

a) When the main ingredient for coke is damaged due to bad weather there will be decrease in supply, thus resulting to a rise in price and a decrease in quantity. Graph-1

b) An increase in the price of substitute will increase the demand thus resulting to an rise in price and quantity

c) With an increase in suppliers the supply will increases, prices will fall and quantity will increase

As per norms we have to answer the first question

PART-1 PART-3 Price GRAPH-1 Price GRAPH-3 S, QQQuantity QQ, Quantity Supply Decreases, Price increases, Quantity decreases Supply Increases, Price decreases, Quantity increases PART-2 GRAPH-2 Q, Q, Quantity Demand Increases, Price and Quantity increases