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Answer to Question #47885 in Microeconomics for Asad Badvi

Question #47885
Q9. KEY QUESTION How will each of the following changes in demand and/or supply affect equilibrium price and equilibrium quantity in a competitive market; that is, do price and
quantity rise, fall, or remain unchanged, or are the answers indeterminate because they depend on the magnitudes of the shifts? Use supply and demand diagrams to verify your
answers.
a. Supply decreases and demand is constant.
b. Demand decreases and supply is constant.
c. Supply increases and demand is constant.
d. Demand increases and supply increases.
e. Demand increases and supply is constant.
f. Supply increases and demand decreases.
g. Demand increases and supply decreases.
h. Demand decreases and supply decreases.
Q10. In 2001 an outbreak of foot-and-mouth disease in Europe led to the burning of millions of cattle carcasses. What impact do you think this had on the supply of cattle hides, hide
prices, the supply of leather goods, and the price of leather goods?
Expert's answer
Q9. How will each of the following changes in demand and/or supply affect equilibrium price and equilibrium quantity in a competitive market; that is, do price and quantity rise, fall, or remain unchanged, or are the answers indeterminate because they depend on the magnitudes of the shifts?
a. Supply decreases and demand is constant - equilibrium price increases, equilibrium quantity falls.
b. Demand decreases and supply is constant - equilibrium price decreases, equilibrium quantity falls.
c. Supply increases and demand is constant - equilibrium price decreases, equilibrium quantity increases.
d. Demand increases and supply increases - equilibrium price is indeterminate, equilibrium quantity increases.
e. Demand increases and supply is constant - equilibrium price increases, equilibrium quantity increases too.
f. Supply increases and demand decreases - equilibrium price falls, equilibrium quantity is indeterminate.
g. Demand increases and supply decreases - equilibrium price increases, equilibrium quantity is indeterminate.
h. Demand decreases and supply decreases - equilibrium price is indeterminate, equilibrium quantity falls.
Q10. In 2001 an outbreak of foot-and-mouth disease in Europe led to the burning of millions of cattle carcasses. What impact do you think this had on the supply of cattle hides, hide
prices, the supply of leather goods, and the price of leather goods?
The supply of cattle hides will decrease, the hide prices will increase, that's why the supply of leather goods will decrease too (as cattle hides are used to to produce leather goods) and the price for them will increase.

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