Answer to Question #275929 in Microeconomics for gini

Question

In the year 2015, Maggie was banned in India for using more than permissible limits of harmful chemicals such as lead, MSG (Monosodium glutamate). After a few months the ban was lifted. However, this controversy made Indian consumers aware of harmful ingredients such as lead, MSG and their effects.a) What could be possible effects of this increasing awareness on the equilibrium quantity and price of Ching’s noodles with one of the ingredients as MSG? Explain with the help of a demand-supply graph.
B)One of the main ingredients used in Ching’s noodle is Maida (refined wheat flour). Suppose in the same year there was a very good harvest of wheat, so prices of wheat fell. How will it affect Ching’s noodle market (compare with part a)?

Answer 1

a)      

Increased awareness of the presence of MSG ingredients in Ching’s noodles will lead to decreased demand for the product by the consumers. This will cause a shift in the demand curve to the left which translates to reduced equilibrium quantity demanded (Q₀ to Q₁) and the equilibrium price (P₀ to P₁)

This can be illustrated clearly in the diagram below;

b)     Increase in wheat harvest

An increase in wheat harvest would lead to an increase in the supply of Ching’s noodles. A shift of the demand curve to the right will cause a decrease in the price and an increase in the quantity demanded of the Ching’s noodle. The quantity demanded increases as compared to part (a) above.