Question

M S Subs and Bere's owing versions toge Sved Consider the market for bowling at Bert's Big Bad Bowling Bonanza in Madison. Assume the market for bowling at Bert's is originally in equilibrium. Explain how the equilibrium price and quantity of bowling games at Bert's would change as a result of each change described below, ceteris paribus. For each scenario, draw a graph to illustrate your answer. 6. The cost of electricity to run Bert's Bowling Bonanza building increases. Price per Market For Bowling at Bert's Game (5) Explanation: #of Games (0) 7. The price of a game of bowling at Anastasia's Amazingly Astounding Alley is cut in half assume howling at the two establishments are substitutes). Price per Market For Bowling at Bert's Game (5) Explanation: #of Games (0) 8. Suppose a new scientific report comes out clearly linking bowling to an increase in life expectancy (du

Answer 1

In case 1, the rise in price of electricity will increase total cost and this is expected to reduce profit. Hence, the supply is affected and so the supply curve shifts left. There is an increase in price but a decline in quantity.

Effect of a decrease in the supply Price($) S'S Supply curve SS - - - - --- - - Demand curve DD QI QO Quantity

In case 2, price of substitute is reduced which helps consumers to switch to cheaper substitute. This decreases the demand at Bert's Bowling Bonanza and so the demand curve shifts to the left. Price is reduced and at the same time quantity is decreased as well.

Price($) Supply curve SS E---- PO P1 E- - - - - - - - - - Demand curve DD D'D' - - Q1 QO Quantity