8. Short-run and long-run effects of a shift in demand Suppose that the chicken

Question

8. Short-run and long-run effects of a shift in demand Suppose that the chicken industry is in long-run equilibrium at a price of $5 per pound of chicken and a quantity of 300 million pounds per year Suppose that WebMD claims that the bacteria found in chicken will decrease your expected life span by 2 years WebMD's claim will cause consumers to demand chicken at every price. In the short run, firms will respond by Shift the demand curve, the supply curve, or both on the following diagram to illustrate these short-run effects of WebMD's claim 10 Supp Demand Supply 4 Cr mand 0 60 120 180 240 300 360 420 480 540 600 QUANTITY (Millions of pounds)

Explanation / Answer

(a) With this health hazard announcement, consumers will demand less chicken at each price. Suppliers will respond by decreasing output.

(b) In the long run, some firms will respond by decreasing prices until equilibrium is restored.

(c) Please provide the drop-down alternatives to answer the question.

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