Question

29

The graph below depicts the market for shoes. a. Use the diagram below to illustrate that a less expensive material is developed for the soles of shoes. Instructions: Use the tool provided 'New line' to draw a new line that reflects the market effect of this event. Plot only the endpoints of the line. Market for Shoes Tools New line Q1 Quantity of shoes

Answer 1

The event will take place in two aspects:

POINT OF VIEW OF CONSUMER:

When less expensive material is used in the sole of shoe, this will decrease the cost of production and for the producer point of view the supply curve shifts rightward which is shown below

.

9 1

S is the initial supply curve and D is initial demand curve. Supply curve shifts from S to SC leading to fall in price and rise in quantity.

Another aspect is POINT OF VIEW OF CONSUMER:

When less expensive sole is used which decreases the quality of shoes and demand will fall. Demand curve shifts leftwards.

Here initial demand curve is D1 and initial supply curve is S1. Demand curve shifts from D1 to D leading to fall in price and quantity.