17. Another supply and demand puzzle

Suppose the market price of chicken wings in a university town recently decreased. Economics students studying at the university are discussing potential causes of the price decrease. One group of students theorize that the price decreased because the price of buffalo sauce, an important ingredient for making chicken wings, has decreased. Others claim the decrease in the price of chicken wings is because of a recent increase in the price of french fries. Everyone agrees that the increase in the price of french fries was caused by a recent increase in the price of potatoes, which are not generally used in making chicken wings.

The first group of students claim the decrease in the price of chicken wings can be attributed to the fact that the price of buffalo sauce, an important ingredient for making chicken wings, has decreased.

On the following graph, adjust the supply and demand curves to illustrate the first group's explanation for the decrease in the price of chicken wings.

Note: Select and drag one or both of the curves to the desired position. Curves will snap into position, so if you try to move a curve and it snaps back to its original position, just drag it a little farther.

DemandSupplyPRICE (Dollars per chicken wing)QUANTITY (Chicken wings)DemandSupply

The second group of students attributes the decrease in the price of chicken wings to the increase in the price of french fries.

On the following graph, adjust the supply and demand curves to illustrate the second group's explanation for the decrease in the price of chicken wings.

DemandSupplyPRICE (Dollars per chicken wing)QUANTITY (Chicken wings)DemandSupply

Suppose that both groups of students are on the right track, and each of the events described above are partially responsible for the decrease in the price of chicken wings. Based on your analysis of the explanations offered by the two groups of students, how would you determine which of the possible causes was the dominant cause of the decrease in the price of chicken wings?

Whichever change occurred first must have been the primary cause of the change in the price of chicken wings.

If the equilibrium quantity of chicken wings decreases, then the demand shift in the market for chicken wings must have been larger than the supply shift.

If the price decrease was small, then the supply shift in the market for chicken wings must have been larger than the demand shift.

If the equilibrium quantity of chicken wings decreases, then the supply shift in the market for chicken wings must have been larger than the demand shift.