Question

Consider the market for exchange of Atlantic cod and suppose that it is perfectly competitive. For each of the following
scenarios identify the following: which curve shifts (Demand or Supply), which direction it goes in (Right or Left), what
happens to price as the market re-establishes equilibrium (Rise or Fall), and what happens to quantity exchanged as the
market begins to clear (Rise of Fall).
A. A new study shows that Atlantic cod is tainted with high volumes of mercury and could make people sick if they
eat too much of it.
B. The price of haddock (a similar fish to cod) falls.
C. The price of tartar sauce (a condiment often used to season cod) falls.
D. Analysts predict that anticipated changes to fisheries regulations will cause cod prices to rise in the future.
(Show the effect on the market now).

Answer 1

A) Because the Atlantic Cod makes the prople sick so they will buy less Cod it means demand curve of Cod shifts left, Price falls and quantity exchanged will fall.

B) Due to decrease in price of similar fish people will buy the similar fish and demand of Cod will shift left , price of Cod will fall and quantity exchanged will also fall.

C) If price of Sauce is which is consumed with Cod falls it will increase the demand for Cod fish. So demand curve of Cod fish will shift right , price will increase and quantity exchanged will also increase.

D) Increase in future prices of Cod fish will increase the current demand and demand will shift to right ,

price will rise and quantity exchanged will also increase.

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