Suppose the Quality of Beef Changes Over Time, but the Quality Change Goes Unmeasured

1. If consumers expect the cost of some adept to rise next calendar week, then we generally observe the cost of the proficient rising this week. Explain this fact using a graph.

If the expert is storable, and an increase in cost is expected, consumers will desire to buy the good today, before the cost increases. As a result, the current need for the good increases, which results in an increase in the price of the good today. See graph.

2. The drought in the plain states has fabricated grain, and therefore feed, quite expensive. Many ranchers cannot afford to feed their cattle, and accept sold much of their herd for slaughter.
a. What volition be the immediate consequence of this outcome on the equilibrium toll and quantity of beefiness? Illustrate using a supply and need diagram.

Slaughtering the cows will outcome in an increase in the supply of beef to the market, which will in plough lead to a decrease in the equilibrium price of beef and an increase in the equilibrium quantity of beefiness. See graph.

Market for beefiness

b. Chicken and beef are substitute goods. Illustrate the effect that the slaughter of the cattle herds will have on the equilibrium cost and quantity of craven.

Equally the price of beef decreases, consumers volition buy more beef and less chicken. The demand for chicken will subtract, causing a decrease in the equilibrium price and quantity of craven. See graph.
Market place for chicken

c. Every bit it happens, the slaughter of beef cattle has coincided with a decrease in consumers' income. Assuming that steak is a normal good while hamburgers are an junior skilful, utilise a supply-and-demand diagram for either market to illustrate the combined consequence of the two aforementioned events on the equilibrium price and quantity of hamburgers and steak.

Every bit consumers' income decreases, the demand for normal goods (such as steak) decreases while the demand for inferior goods (such as hamburgers) increases. Keep in heed that our conclusion from part a is still valid. A lower cost of beefiness will increase the supply of all goods in which beef is an input. Therefore in each of the two markets in question we bargain with simultaneous shifts in supply and demand.

three. Presume that the markets for saccharide cane, rum, and whiskey are initially in equilibrium. Assume further that Hurricane Marilyn destroys much of the Jamaican sugar cane crop. Saccharide cane is a principal ingredient in rum, but information technology is not an ingredient in whiskey. Analyze the event of the hurricane on the markets for each of the 3 goods. Explain using graphs.

Step I - The marketplace for carbohydrate pikestaff
The Hurricane results in a decrease in supply (at whatsoever given toll, sellers are no longer able to provide every bit much cane every bit they used to). As a result, the equilibrium price of sugar cane volition increase, and the equilibrium quantity will decrease. See graph.
Market for carbohydrate pikestaff

Step Two - The market for rum
Sugar cane is a principal ingredient in rum, and it is now more expensive. An increase in the price of inputs causes a decrease in supply. As a result, the equilibrium cost of rum will increase, and the equilibrium quantity volition decrease. The graph will be like to the one higher up.

Step Three - The market for whiskey
It is reasonable to assume whiskey and rum are substitutes. Rum is now more than expensive than it used to be (encounter Step Two). As a result, more consumers will buy whiskey instead. This volition cause an increase in the demand for whiskey, which leads to higher equilibrium cost and quantity of whiskey. See graph.
Market for whiskey

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Source: https://www.washburn.edu/sobu/dnizovtsev/200P03_SD2ans.html

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