Question

PROBLEM #8 For the changes presented in each section below, indicate what happens to demand or supply, and to equilibrium quantity and price, for the indicated product. Assume that only one side of the market is affected by the change (supply or demand). Illustrate each answer with supply-and-demand graphical analysis The price of cotton, an input in the production of shi rts starships, falls. Demonstrate the impact of this change on the market for shirts а. b. In the 1920s, Henry Ford patented his assembly line, which allowed Ford Motor Company to manufacture more cars more efficiently than ever before. Show what effect this had on the market for cars During the Plague of Justinian, Constantinople's population fell by 40%. Show whateffect this had on the market for wine in the city c. d. In the early 1900s, Upton Sinclair shocked consumers by publishing The Jungle, which described the unsanitary and inhumane conditions that prevailed in Chicago's meatpacking districts. Show what effect this might have had on the market for sausages

Answer 1

Page 1 o fall in perice of collon would lead to all in cost of production for Shiests leading to Increased supply of Shirts as a result supply cueve Shifts outwards. - SS Shiats" DD o & Quantity of share New market equilibrium is obtained Lat En leading to Increase in equilibriune quantity from o to ch and equilibrios Price falls gecom Po to Pr. bids a result supply of cars increased resulting in outward shift 5 of supply of cars Pucis COUP market do & duarity after Newn equilibrium is E, with increased aquilibrium guantity di and decreased w perice Pi.

Page 2 A fall in population by 40 to led to Hall in demand for wine leading to backward shift of demand curve. CSS Pence of Uutkee EKUDD The New Equilibrium is at E with fall in equilibrium duantity to O, and Jalul in equilibrium Price to Pl. dit might have led to fall in demand of sausages and this to a backward! Sheft in demand curie foesawage. Poice for PL sawasa DD; Quantity of sausages this new Equilibrius is ofteunod at I with fall in es. Oty to di and! all in leg. Price to Pr.

e Page 3 Sugar being a substitute to molasses fall in price of sugar led to shillin demand towards Sugar and the Hall in demand of molasse & leading ho backward shift of demand curve In market fou molasses, HE hobesser cuantity of میری نظام Both equilibecium P and os fall to P, and o, respectively, with an expectation of cure in Pline of company's stock, its demand must have Increased leading to torward shift of demand Curs Bocken ADD DD both L a o , Quantity of shocks en er wibrium P and O increase to P, an Oi respectively