Answer to Question #171853 in Microeconomics for Makombe Chilonge

Question

A key skill in economics is the ability to use the theory of supply and demand to analyze specific markets.

Scenario 1: Suppose that, as part of an international trade agreement, the Zambian government reduces the tariff on imported fish. Will this affect the supply or the demand for Fish? Why? Which determinant of demand or supply is being affected? Show graphically with before- and after-curves on the same axes. How will this change the equilibrium price and quantity of Fish? Explain your reasoning.

Scenario 2: Suppose the Ministry of health publishes a study finding that Fish reduces the probability of getting Corona Virus. How do you imagine this will affect the market for Fish? Why? Which determinant of demand or supply is being affected? Show graphically with before- and after-curves on the same axes. How will this change the equilibrium price and quantity of Fish? Explain your reasoning.

Answer 1

Scenario 1:

The demand for fish will decrease as a result of increase in supply; more fish will be bought because of the decrease in tariffs.

 

The determinant of demand and supply being affected is; Change in price of goods.

Increase in demand

 

 

 

Change in equilibrium price; there will be a decrease in equilibrium price and quantity.

 

Scenario 2:

There will be an increase in demand for fish.

 

The determinant of demand and supply is; Change in consumer taste, preferences and popularity.

 

Demand shifts to the right  

 

Change in equilibrium price; there will be an increase in equilibrium price and quantity.