Utilizing market demand and market supply curves for spaghetti, help me illustrate the effect on equilibrium price and quantity of spaghetti for:
Increased worldwide demand for rice leads to an increase in the price of ride (which many see as an alt to spaghetti in preparing meals)
Increase in the price of rice and people will switch to spaghetti -- shift demand out.
To illustrate the effect of increased worldwide demand for rice on the equilibrium price and quantity of spaghetti, we need to consider the market demand and market supply curves for spaghetti.
1. Start by drawing a standard demand and supply graph with quantity on the x-axis and price on the y-axis.
2. Initially, assume that the market is in equilibrium with a certain quantity of spaghetti being demanded and supplied at a particular price. This is represented by the intersection of the demand and supply curves.
3. With an increase in worldwide demand for rice, it is expected that the price of rice will increase. This increase in the price of rice can lead people to switch to spaghetti as a substitute since they perceive it as an alternative for their meals.
4. As people shift their demand from rice to spaghetti, the demand curve for spaghetti will shift outwards. This shift represents an increase in the quantity demanded at each price level.
5. To illustrate this shift, we need to move the demand curve to the right, parallel to the original demand curve. The new demand curve will be to the right of the original one, reflecting the increased demand for spaghetti due to the increase in the price of rice.
6. Consequently, the equilibrium price of spaghetti will increase. The new equilibrium price is determined by the intersection of the new demand curve and the original supply curve.
7. The equilibrium quantity of spaghetti will also increase due to the increased demand. This can be observed by drawing a vertical line from the new equilibrium price to the x-axis, which represents the new quantity of spaghetti being exchanged in the market.
In summary, an increase in worldwide demand for rice, leading to an increase in its price, can cause a shift in the demand curve for spaghetti, resulting in an increase in both the equilibrium price and quantity of spaghetti.