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Market Equilibrium Exercises HELP!!!! watch

    • Thread Starter


    Hi Guys,

    Been set 2 tasks to stretch our learning but have no idea..

    I need to draw a diagram to show the affect and then explain it:

    1) The market for butter where there is a temporary health scare concerning its consumption, coinciding with a rise in the cost of animal feed (an input cost)

    2) The market for quality wooden furniture (made with imported hardwood), with the sterling rising against most world currencies, combined with a long term rise in real incomes.

    Please helppp

    1) as there is a concern to do with consumption, the demand will fall as consumers are worried about the product (i.e. shift to left). as the cost of production increases, supply also is cut down, (shift to left)

    overall, quantity of product decreases, price may stay around the same depending on how much each shifts!

    2) as the furniture is made of imported goods and the sterling is rising, one pounds gets us more of a foreign currency, thus lower costs, larger supply (shift to right). as long term rises in real wages, people have more disposable income and will be more willing to buy high quality/luxury products, thus demand (you may want to consider saying demand increases in the long term) increases (shift to right). In this case, the quantity increases due to higher supply and demand, price once again affected by both
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Updated: January 29, 2015
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