For each of the following economic \"shocks\" draw and label a supply and demand

Question

For each of the following economic "shocks" draw and label a supply and demand diagram to show the original equilibrium and the new equilibrium after the "shock" has occurred.

Shock #1. A freeze in south Florida damages the orange crop. Show the effect in the market for orange juice.

Shock #2. Obama refuses to release permits for an oil pipeline that would carry Canadian oil from Canada to the USA. Show the effect on the future US market for gasoline.

Shock #3. There is a resurgence in popularity for Pokemon trading cards. Show the effect in the market for pokemon trading cards.

Shock #4. Apple decides to triple th number of IPODS that they produce each year. Show the effect in the market for I-Tunes music downloads.

I want to know which curve should be changed in 4 different shocks.

Also, I want to know the detail information about why it should be changed.

For instance, if supply curve should be changed in Shock #1, I want to know why It changed.

Explanation / Answer

Shock #1

Damage of orange crop due to freeze will reduce the supply of oranges in the market. With demand remaining same, this decrease in supply of oranges in market will lead to rise in price of oranges in the market.

Oranges acts as input in production of orange juice. Change in input prices impacts the supply of a commodity. Increase in input prices leads to decrease in supply and vice-versa.

With rise in prices of oranges, input cost of orange juice producers will rise. This rise in input cost will reduce their profit margin prompting them to decrease the production. This means supply of orange juice will decrease. Decrease in supply means leftward shift of supply curve.

With demand remaining same, this leftward shift in supply curve will result in a rise in equilibrium price of orange juice.

Shock #2

This refusal to release permits for an oil pipeline that would carry Canadian oil from Canada to the USA implies that this oil pipeline will not operate which in turn implies that increase in supply of gasoline in US market as expected due to this pipeline will not materialize.

With demand for gasoline increasing day-by-day, future demand for gasoline will be higher but in absence of stated pipeline future supply will remain at original levels.

Increase in future demand for gasoline means that demand curve for gasoline in future will shift rightwards but no change in future supply of gasoline implies supply curve will remain at original level.

This rightward shift in demand curve and no change in supply curve will result in rise in equilibrium price.

Shock #3

It has been stated that popularity of Pokemon trading cards is increasing. This means that more people will demand these cards. This increase in demand for Pokemon trading cards will shift the demand curve for these cards to the right.

With supply remaining same, this rightward shift in demand curve will result in a rise in equilibrium price of Pokemon trading cards.

Shock #4

If company decides to triple the number of IPODS it produces then this implies that supply of these IPODS in market will increase. This will result in a decrease in price of IPODS.

Decrease in price of IPODS will lead to rise in their quantity demanded. With more people having IPODS, demand for I-Tunes music downloads will also increase.

This increase in demand for I-Tunes music downloads will shift the demand curve for I-Tunes music downloads to the right.

With supply of I-Tunes music downloads remaining same, this rightward shift in demand curve of I-Tunes music downloads will lead to rise in prices of I-Tunes music downloads in the market for I-Tunes music downloads.

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