What effect will each of the following have on the demand and/or supply of Produ

Question

What effect will each of the following have on the demand and/or supply of Product B? Be sure your answer states: 1) which curve changed and why, 2) which direction the curve shifted in and why, 3) the impact on equilibrium price and quantity. Tip: Except for item E, only one curve will shift at a time.
A. A decline in the number of firms in industry B.
B. The price of product C, a substitute for consumers, falls.
C. A decline in the prices of resources required to make Product B.
D. Consumers anticipate that the price of B will be lower in the near future.
E. Both C and D occur at the same time.

Explanation / Answer

A. 1) the supply curve of product B would be changed because now the lesser number of firms produce B. 2) the supply curve will shift in upward backward direction 3) equilibrium price will increase and quantity will decline B. 1) since C is a subtitute people will move towards consuming more of C as its price falls .hence the demand for B declines. 2) the demand curve will move in backward downward direction. 3) the equilibrium price of product B will decrease and quantity will also decline. C. 1) if the price of the resources required to make B declines then obviously the producers will be generating more profits and hence they would increase their supply hence supply curve changes. 2) the supply curve would be shifted in forward downward direction. 3) the equilibrium price of product B will decrease and quantity will increase. D. 1) if the Consumers anticipate that the price of B will be lower in the near future then they will decline their present consumption on B and will wait for the future. this will cause a change in the demand curve of B as the demand of product B declines. 2) the demand curve would be shifted in backward downward direction. 3) the equilibrium price of product B will decrease and quantity will also decline. E. 1) if both C and D occur at the same time then simultaneosuly the demand and supply curve would be effected. 2) the demand would be shifted in backward downward direction and the supply curve would be shifted in forward downward direction 3) the equilibrium price would definitely decline the equilibrium quantity depends on the relative strength of the shift of supply and demand curve. it could increase if shift in supply curve is more then the demand curve, it would decrease if demand curve shifts more then supply curve and there would be no change in the equilibrium quantity if the shift in both supply and demand curve is same.

Related Questions

Navigate

• Browse (All)
• Browse W
• Subjects

---

---

Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.