Answer to Question #199601 in Microeconomics for njabulo

Question

Q.2.1 Explain the impact of each of the following scenarios on ONLY the market for plain, bottled water in Gauteng. • State whether each of the following scenarios will impact the demand or the supply curves for plain, bottled water. • State whether the impact will shift the curve or cause a movement along the curve. • If it is a shift, state the direction of the shift and motivate your answer.

Q.2.1.1 Drinking bottled water is considered healthy, ceteris paribus.

Q.2.1.2 The number of firms selling bottled water in Gauteng has increased.

Q.2.1.3 The price of bottled Vitamin water (a substitute in consumption) has decreased.

Q.2.1.4 The price of plastic bottles has increased, ceteris paribus.

Q.2.1.5 Household incomes have decreased.

Answer 1

2.1.1

It will have an impact on the demand curve. It will cause the demand curve to shift. The demand curve will begin to shift to the right. When drinking bottled water is thought to be healthful, the market for bottled water increases. As a result, at each price point, demand for bottled water rises. It will have an impact on the demand curve. It will cause the demand curve to shift. The demand curve will begin to shift to the right. When drinking bottled water is thought to be healthful, the market for bottled water increases. As a result, at each price point, demand for bottled water rises.

2.1.2

It will have an impact on the supply curve. The shift curve will be shifted. The supply curve will begin to move to the right. As the number of businesses selling bottled water in Gauteng grows, so does the availability of bottled water. As a result, at each price point, the quantity of bottled water grows.

2.1.3

It will have an impact on the demand curve. It will cause the demand curve to shift. The demand curve will begin to move to the left. Goods that are consumed in place of one another are known as substitute goods. People will drink more of the available cheaper alternative and less of the bottled water when the price of bottled Vitamin water falls. As a result, at each price point, the demand for bottled water declines.

2.1.4

It will have an impact on the supply curve. The shift curve will be shifted. The supply curve will begin to move to the left. The cost of production rises as the price of plastic bottles rises. Profitability suffers as a result, and the supply of bottled water declines. As a result, at each price level, the availability of bottled water drops.

2.1.5

It will have an effect on the demand curve. It will cause the demand curve to alter. The demand curve will begin to shift to the left. When a consumer's income falls, so does their purchasing power, and they can now afford less. As a result, they reduced their usage and purchased fewer bottled water bottles. As a result, at each price point, the demand for bottled water declines.