Question
Consider the market for strawberries.There is an increase in the price of scones, which is a complement to strawberry jam.At the same time, a period
Consider the market for strawberries.There is an increase in the price of scones, which is a complement to strawberry jam.At the same time, a period of poor summer weather results in a smaller harvest of strawberries this season than the previous season.
Consider the first scenario (the change in the price of scones). The effect of this change is to shift the Answer = demand or supply curve to the Answer = left or right.
Consider the second scenario (the impact of the weather).The effect of this change is to shift the Answer = demand or supply curve to the Answer = left or right.
Use the results of your answers above to complete the following table. Begin by indicating the overall change in price and equilibrium quantity for each scenario individually. In the final column of the table, indicate the change in the equilibrium price and quantity when you combine the shifts above. If you cannot determine the answer without knowing the magnitude of the shifts, choose "Cannot determine" as an option.
Equilibrium object | Scenario 1 | Scenario 2 | Combined Scenario 1 and Scenario 2 |
---|---|---|---|
Price | AnswerDecreasesIncreasesRemains unchangedCannot determine | AnswerDecreasesIncreasesRemains unchangedCannot determine | AnswerDecreasesIncreasesRemains unchangedCannot determine |
Quantity | AnswerDecreasesIncreasesRemains unchangedCannot determine | AnswerDecreasesIncreasesRemains unchangedCannot determine | AnswerDecreasesIncreasesRemains unchangedCannot determine |
True or false: When both the demand and supply curves shift in opposite directions, the curve that shifts by the smaller magnitude has the larger effect on the undetermined equilibrium object: Answer = FalseTrue.
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