Answer to Question #94619 in Microeconomics for Drake lopez

Question

For each of the following statements, draw a diagram that
illustrates the likely effect on the market for eggs. Indicate
in each case the impact on equilibrium price and equilib￾rium quantity.
a. A surgeon general warns that high-cholesterol foods cause
heart attacks.
b. The price of bacon, a complementary product, decreases.
c. An increase in the price of chicken feed occurs.
d. Caesar salads become trendy at dinner parties. (The dressing
is made with raw eggs.)
e. A technological innovation reduces egg breakage
during packing.

Answer 1

a) The risk of heart attack will change people's preferences and this will ause demand to go down. this wil then lead to a decrease in equilibrium quantity and price.

b) The decrease in price of complementary product will lead to increase in quantity demanded thus increasing equilibrium price and quantity.

c) The increase in price of chicken feed will lead to increase cost of supply and this will decrease in supply hence lower quantity and higher prices.

d) The demand for eggs will increase. Equilibrium price and quantity will also rise

e) Supply will increase and equilibrium price will decrease.