Answer to Question #297928 in Microeconomics for jeffery

Question

For each of the following statements, illustrate the effect of each event on the market for red snapper fish and indicate the effects on the equilibrium price and quantity.

i. A surgeon general warns that high-cholesterol foods such as beef cause heart attacks. (3 marks)

ii. A new fishing wire reduces the time taken to harvest fish while at the same time there is a report that persons have developed food poisoning from consuming fish. (3 marks)

Answer 1

i) As a response to the general surgeon warning on high cholesterol foods, consumers will tend to substitute the beef consumption with red snapper fish thus increasing the demand for red snapper fish.

ii) The supply of red snapper fish will rise as they are now being harvested with ease while the demand for red snapper fish will decline due to the reports about food poisoning. This will leave us with a surplus in the market.