1. Changing Equilibrium Question a) Improvements in breeding and production meth
ID: 1142368 • Letter: 1
Question
1. Changing Equilibrium Question
a) Improvements in breeding and production methods have made it much easier to grow orchids.How will this affect the orchids market? What is the predicted effect on the price and quantity of orchids?
b) Early indications are that the economy will improve this year. How will this affect the market for cars? What is the predicted effect on the equilibrium quantity and price?
c) Despite the lack of scientific evidence, more Americans are concerned about the health effects of high-fructose corn syrup. How will this affect the market for corn? What is the predicted effect on the equilibrium quantity and price?
d) Indications are that Google is preparing to sell wireless service. How will this affect the market for cell phone service? What is the predicted effect on the equilibrium quantity and price?
e) The $2.4B federal subsidy for wind power is set to expire after 2015. How would this affect the market for wind power? What is the predicted effect on the equilibrium quantity and price?
f) Suppose that turmoil in the Middle East causes a spike in the price of oil. How would this affect the market for gasoline? What is the predicted effect on the equilibrium quantity and price?
g) In 2014, 6 of the 20 fastest-growing US metro areas were in Florida. How would this affect the market for housing in Florida? What is the predicted effect on the equilibrium quantity and price?
h) New FDA regulations require restaurants to provide calorie information for their products. How would this affect the market for restaurant meals? What is the predicted effect on the equilibrium quantity and price?
Explanation / Answer
(a) Improved production technology that makes it easier to grow orchids, will lower the production cost of orchids. As a result, supply of orchids will rise. Its supply curve will shift rightward, decreasing price and increasing quantity.
(b) Improvement in economy will increase consumer income, which will increase the demand for cars (assuming car is a normal good). Its demand curve will shift rightward, increasing price and increasing quantity.
(c) Negative concern regarding corn syrup will decrease the demand for corn syrup. Since corn is an input to corn syrup production, lower demand for corn syrup will decrease the demand for corn. Its demand curve will shift leftward, decreasing price and decreasing quantity.
(d) Google offering wireless service, which is a component of cell phone service, will increase the supply of cell phone service. Its supply curve will shift rightward, decreasing price and increasing quantity.
NOTE: As per Answering Policy, 1st 4 parts have been answered.
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