Question

7. Draw a diagram showing equilibrium in the market for candy. Clearly label your axes and curves. Now show the effect of a decrease in the price of sugar in the same diagram and mark the new equilibrium price and quantity. The equilibrium price of candy (increases, decreases) and the equilibrium quantity of candy (increases, decreases). 8. When a spell of bad weather results in a very large decrease in the orange crop, newspapers are likely to report "a shortage of oranges." An economist would say that a. the shortage will last until the next growing season when fewer oranges can be produced. b. the shortage is temporary and will be eliminated when the price of oranges rises. c. the existing price of oranges must be above the equilibrium level. d. the weather spell would lead to a surplus of oranges, not a shortage. 9. The equilibrium price of snickerdoodles will increase, decrease, be indeterminate) and the equilibrium quantity of snickerdoodles would increase, decrease, be indeterminate) if the price of sugar increases and the price of chocolate chip cookies (which are a substitute for snickerdoodles) decreased. 10. If the demand curve for Dairy Queen Blizzards (which are made of ice cream and other ingredients like cookies or chocolate pieces) shifts to the left, this could be due to a. an increase in the price of a Dairy Queen Blizzard. b. an increase in consumer income. c. a decrease in the price of other kinds of ice cream desserts. d. an increase in the price of frozen yogurt which is a substitute for Dairy Queen Blizzards.

Answer 1

Answer 7.

As the price of sugar decreases, this means that the price of input for candy falls. This will increase the supply of candy and supply curve will shift to the right.

Hence, a new equilibrium is achieved at which quantity of candy rises and price falls.

See diagram,

NOTE: As per HOMEWORKLIB RULES, first question is answered.