Assume there are three markets: A: Wool; B: Synthetic Fiber; C: Business Travel. Assume we are in the years after the introduction of synthetic fibers. Using demand and supply analysis explain what happens in the SHORT RUN in all three markets and why?

To analyze the short-run effects in each of the three markets (A: Wool, B: Synthetic Fiber, C: Business Travel) after the introduction of synthetic fibers, we need to understand the concept of demand and supply.

Demand refers to the quantity of a good or service that buyers are willing and able to purchase at a given price, while supply refers to the quantity of a good or service that producers are willing and able to offer for sale at a given price. In the short run, the supply of a good or service is relatively fixed, meaning it cannot be easily adjusted.

Let's analyze the short-run effects in each market:

1. Market A: Wool
The introduction of synthetic fibers provides consumers with an alternative to wool, leading to a decrease in demand for wool. As a result, the demand curve for wool shifts to the left. In the short run, the supply of wool remains relatively fixed, so the equilibrium price of wool falls, creating an excess supply. This excess supply puts pressure on wool producers to lower their prices or reduce their production levels to match the decreased demand.

2. Market B: Synthetic Fiber
With the introduction of synthetic fibers, there is an increase in the demand for this new product as consumers substitute it for wool. Due to this increase in demand, the demand curve for synthetic fibers shifts to the right. In the short run, the supply of synthetic fibers remains relatively fixed, so the equilibrium price of synthetic fibers rises, resulting in excess demand. To meet the increased demand, producers can either increase prices or expand their production, depending on their ability to respond quickly to market changes.

3. Market C: Business Travel
Business travel is not directly related to the supply and demand of wool or synthetic fibers. However, the introduction of synthetic fibers can indirectly impact the demand for business travel. Synthetic fibers offer convenience, durability, and cost advantages over wool, which may decrease the need for travel related to the wool industry, such as seeking wool suppliers or attending wool industry conferences. Consequently, the demand for business travel might experience a decrease due to the reduced demand for wool.

It's important to note that these short-run effects are subject to change in the long run as producers and consumers adjust their behavior and expectations.