Draw a supply and demand graph for the market for beer. Suppose that the price of...
Draw a supply and demand graph for the market for beer. Suppose that the price of wine (a substitute good) goes down. Show the effect of this change on your graph. Include good labels for the initial and ending equilibrium.
Homework Answers
Demand and supply graph for the Market of beer:
S is the supply curve.
D is the demand curve.
Q is the equilibrium Quantity demanded.
P is the equilibrium price.
E is the point of equilibrium.
Now, when the price of wine which is a substitute good goes down, the demand for the beer will also decrease as there is a direct relationship between the price of substitute good and the demand for own good.
Also, when the price of substitute good decrease, the supply for own good will increase as producers will be willing to get more and more profits.
New demand and supply curves:
S1 is the new supply curve as
supply will increase and the supply curve will shift forward.
D1 is thr new demand curve as demand will decrease and the demand curve will shift backwards.
Equilibrium Quantity will decrease from Q to Q1.
Equilibrium Price will decrease from P to P1.
E1 is the new equilibrium point.
NOTE: I HOPE YOU WILL BE SATISFIED WITH MY ANSWER. PLEASE DO PROVIDE RATING. THANK YOU AND HAVE A NICE DAY. :))
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