1. Illustrate the following using demand and supply graphs.
a) The market price of a basic digital cell phone fell due to increased production.
b) In 2002, unusually bad weather caused a reduction in the cranberry harvest causing the prices to increase from $22 to $25 for a 100lb barrel.
c) Demand for office space in major US cities dropped significantly between 2009 and 2010. This led to a drop in the rental prices.
d) Deregulation of bread prices in Eastern Europe caused an increase in the price of bread. As a result, the quantity demanded dropped while the quantity supplied rose.(There is no shift here-what will happen when the price ceiling is eliminated)
a) To illustrate the market price of a basic digital cell phone falling due to increased production, we would need to show a shift in the supply curve. The supply curve would shift to the right, indicating an increase in the quantity supplied at each price level. This can be represented on a demand and supply graph by moving the supply curve to the right. As a result, the market price of the cell phone will decrease, indicating a downward movement along the demand curve.
b) To illustrate the increase in cranberry prices due to a reduction in harvest caused by bad weather, we would need to show a shift in the supply curve. The supply curve would shift to the left, indicating a decrease in the quantity supplied at each price level. This can be represented on a demand and supply graph by moving the supply curve to the left. As a result, the market price of cranberries will increase, indicating an upward movement along the demand curve.
c) To illustrate the drop in rental prices for office space in major US cities due to a significant decrease in demand, we would need to show a shift in the demand curve. The demand curve would shift to the left, indicating a decrease in the quantity demanded at each price level. This can be represented on a demand and supply graph by moving the demand curve to the left. As a result, the rental prices for office space will decrease, indicating a downward movement along the demand curve.
d) To illustrate the increase in the price of bread due to the elimination of price ceilings through deregulation in Eastern Europe, we would need to show a shift in the supply curve. The supply curve would shift to the left, indicating a decrease in the quantity supplied at each price level. This can be represented on a demand and supply graph by moving the supply curve to the left. As a result, the price of bread will increase, indicating an upward movement along the demand curve. Additionally, the quantity demanded will decrease, and the quantity supplied will increase.