Question

Jessica Simpson’s Buffalo Wings fast food joint has become quite popular. However, several newspaper stories report generally unsanitary conditions in the chicken processing factories from which Jessica purchases her wings.

How will the bad publicity impact the demand for Jessica’s product? Graphically illustrate the change with a correctly labeled supply and demand graph.

Explain how the results you showed in Part a, above, will impact the number of worker-hours and the wage rate Jessica pays to her Buffalo Wings workers.

A new study is released that not only pronounces Jessica’s chicken clean and safe to eat, it also produces convincing evidence that consumption of large amounts of chicken wings with BBQ sauce increases intelligence in teenage consumers substantially. How will this new study impact the wage rate and employment at Jessica’s restaurant? Illustrate this change with an appropriate graph.

Answer 1

Ans:Bad publicity will lead to decrease in demand i.e demand curve will shft to its left. i.e D to D1

And in case of positive publicity the demand curve will shift to its right i.e d2

Also the wage rate in such situation will increase as the demand of labour will increase the wage rate from shift from 'We' to 'Wx'