The graph shows the market for pasta. Suppose the price of durum flour rises. Dr
ID: 1192117 • Letter: T
Question
The graph shows the market for pasta. Suppose the price of durum flour rises. Draw a curve to show the effect on the market for pasta. Label it. Draw a point at the new equilibrium price and equilibrium quantity. Suppose that as a result of the boycott supermarkets did not raise the price of pasta next month as predicted. Most likely, and the price would. There would be a surplus of pasta; eventually fall there would be a surplus of pasta; eventually rise there would be a shortage of pasta; eventually rise there would be a shortage of pasta; eventually fall the market would be in equilibrium; remain constant.Explanation / Answer
Because the price of main ingredient of making pasta has gone up, therefore cost of making pasta woukld also increase, as a result of which the supply curve would shift to left. Suppliers would now want to supply less because of the increased cost. Now the point where the new leftward supply curve intersects the original demand cuve, equilibrium price would establish, that is, at $1.40 price and quantity 120 pounds. Because of the icreased price the quantity would fall as per the law of demand.
Most likely, there'll be a shortage of pasta and price would eventually rise.
which is reasonable to think. As the price next month does not go up because of boycott, the sellers would want to sell less at this price and hence a shortage. Demand has still not fallen drastically because of which price would eventually rise.
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