It is suggested that you take a few minutes to plan and outline your answers. In answering your questions, you should emphasize the line of reasoning that generated your results: it is not enough to list the results of your analysis. Include diagrams, if useful or required, in explaining your answer. All diagrams should be clearly labeled.

1. Assume that the market for ostrich eggs is in equilibrium, and that emu eggs are a close substitute. Poultry

scientists at The University of Oklahoma in Norman, Oklahoma discover a method of increasing ostrich egg

production; however emu egg production remains unaffected.

a. Using two well-labeled graphs, one for the ostrich egg market and the other for the emu market,

indicate the market equilibrium before the effects of the discovery

b.

i. Determine what will happen to the price and quantity in the ostrich egg market as a result of

the discovery.

ii. Illustrate using your graph.

c.

i. Determine what will happen to the price and quantity of the emu egg market as a result of the

change in price of ostrich eggs that you identified in part (b).

ii. Illustrate using your graph.

d. Now suppose that a blood-thirsty, Longhorn axe-murderer kills half of the ostrich population. Using

a new graph:

i. Determine what will happen to the price and quantity in the ostrich egg market.

ii. Illustrate on your graph how you determined the effects of the axe-murderer.