How will the following sets of events affect equilibrium price and quantity for the product highlighted in italics? In each case, identify how both the
demand and supply curves shift.
a) Consumer preferences for spicy food increase at the same time as the wages paid to farmworkers drop, affecting the demand and supply of jalapeño peppers.
Market
Price:
Quantity:
Determinant(s):
b) There is a widespread consumer expectation that the price of tuna will rise at the same time as the number of tuna fishers drops.
Market
Price:
Quantity:
Determinant(s):
To understand how the sets of events will affect equilibrium price and quantity, we need to analyze the shifts in both the demand and supply curves.
a) Consumer preferences for spicy food increase at the same time as the wages paid to farmworkers drop, affecting the demand and supply of jalapeño peppers.
For this event, the increase in consumer preferences for spicy food will cause an increase in the demand for jalapeño peppers. This shift in demand will be represented by a rightward shift of the demand curve.
On the other hand, the wages paid to farmworkers dropping will affect the supply of jalapeño peppers. If the wages decrease, it might result in a decrease in the supply due to potential labor shortages. This shift in supply will be represented by a leftward shift of the supply curve.
Considering both shifts, we can determine the effects on equilibrium price and quantity:
- Market Price: The combined effects of increased demand and decreased supply will lead to an increase in the equilibrium price.
- Quantity: The change in quantity will depend on the magnitude of the shifts in demand and supply. If the increase in demand is larger than the decrease in supply, the equilibrium quantity will increase. However, if the decrease in supply is larger than the increase in demand, the equilibrium quantity will decrease.
- Determinant(s): The determinant(s) affecting this event are consumer preferences and changes in wages paid to farmworkers.
b) There is a widespread consumer expectation that the price of tuna will rise at the same time as the number of tuna fishers drops.
In this case, the widespread consumer expectation that the price of tuna will rise will affect the demand for tuna. This expectation will cause an increase in demand, as consumers will buy more tuna now to avoid paying higher prices in the future. This shift in demand will be represented by a rightward shift of the demand curve.
Simultaneously, the number of tuna fishers dropping will affect the supply of tuna. With fewer fishers, the supply of tuna in the market will decrease. This shift in supply will be represented by a leftward shift of the supply curve.
Considering both shifts, we can determine the effects on equilibrium price and quantity:
- Market Price: The combined effects of increased demand and decreased supply will lead to an increase in the equilibrium price of tuna.
- Quantity: The change in quantity will again depend on the magnitude of the shifts in demand and supply. If the increase in demand is larger than the decrease in supply, the equilibrium quantity will increase. However, if the decrease in supply is larger than the increase in demand, the equilibrium quantity will decrease.
- Determinant(s): The determinant(s) affecting this event are consumer expectations and the number of tuna fishers.