Macroeconomics Products Using the table, for each line item, write a paragraph d

Question

Macroeconomics

Products

Using the table, for each line item, write a paragraph describing how the market for each specific product will be affected by the associated event. Describe which curve will shift (demand or supply or both), what effect it will have on price (rise or fall in price), and what will happen to quantity (rise or fall in quantity). Each line item requires a paragraph.

Event Market for: Price for hamburgers has risen; demand for hot dogs is rising. Hot Dog Buns The President of the United States has released a statement that unemployment is falling, there is a rise in output in the Country, and manufacturing activity is rising. Popular Vacation Spots The Chinese government has decided to subsidize its domestic automobile industry with stimulus money. Automobiles in China Manufacturers who use petroleum as an input see prices of crude rising. Manufactured goods that use plastic as an input

Explanation / Answer

a) As hot dogs and hamburgers are substitute so increase in price of hamburgers will increase the demand for hot dogs, as demand for hot dogs will increase market for hot dog buns will also rise so the demand curve of hot dog buns will shift to right which will on later stages shift the supply curve also to right as manufacturers will be producing more to fulfill the demand. Later price will rise as demand has risen, increase in demand will lead demand to rise in quantity.

b) For the given condition, demand of leisure will rise and so the demand of popular vacation spots will rise leading the shift of demand curve to the right. price of vacation on popular spots will go up but demand will not rise much as the supply of vacation location is a natural resource and supply is limited.

c) The demand of automibiles in China will remain same but the supply will shift to right as now chinese manufacturer will be able to produce cheaper than imported goods. Price will remain same but quantity of domestically manufactured automobiles will rise and supply of imported cars will fall.

d) This is a supply shock. The demand will remain same initially but the supply will fall so supply curve will shift to the left. the prices of the goods using plastic will go up and quantity will fall.

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