Answer to Question #327844 in Microeconomics for Jaanv

Question

2. What will happen to the equilibrium price and quantity of butter in each of the following cases? You should state whether demand or supply or both have shifted and in which direction using the appropriate diagrams:

a) A rise in the price of margarine

b) A rise in the price of bread

c) A rise in the demand for bread

d) An expected increase in the price of butter in the near future

e) A tax on butter production

Answer 1

A. supply has increased but demand has decreased

B. both supply and demand have decreased

C. demand has increased but supply has decreased

D. both supply and demand have increased

E. supply has increased but demand has decreased