Answer to Question #121106 in Microeconomics for kamal

Question

. For each of the following statements, draw a diagram that illustrates the likely effect on the market for eggs. Indicate in each case the impact on equilibrium price and equilibrium quantity.
a. Dr. Adeeb Rizvi warns that high-cholesterol foods cause heart attacks.
b. The price of bread, a complementary product, decreases.
c. An increase in the price of chicken feed occurs.
d. Caesar salads become trendy at dinner parties. (The dressing is made with raw eggs.)

Answer 1

As per the given question,

a) Dr. Adeeb Rizvi warns that high-cholesterol foods cause heart attacks- It means the demand of the product will go down, the demand curve shit left which will result the lower equilibrium price and equilibrium quantity.

b. The price of bread, a complementary product, decreases- It means the demand will increase due to which the demand curve shift to right. The result of which lead to the higher equilibrium price and equilibrium quantity.

c) The production cost of eggs will increase which leads to lower supply Hence supply curve will shift left leading to higher equilibrium price but lower quantity.

d) As we know that egg is a complementary good for Ceasar salads, so demand for eggs will increase, which leads to shift in demand curve to the right. It will be the result to higher equilibrium price and equilibrium quantity for eggs.