Question

1) Briefly indicate how you would expect each of the following events to affect the US supply of turkeys and explain your reasoning. The supply elasticity is 0.40 (5 points each).

a. A 20% decrease in the price of corn and soybeans.

b. A 10% increase in the price of turkeys.

c. Development and adoption of a new synthetic hormone that decreases turkey mortality and improves feed efficiency.

Answer 1

A) decrease in the price of corn and soybean is likely to to increase the production of turkey. This is because it is the food for turkeys and when the food becomes cheaper more of them can be fed. the supply of turkeys will increase and the supply curve will shift to the right.

B) supply elasticity is 0.4. increase in the price of turkeys by 10% is going to increase the quantity supplied by 0.4 x 10 or 4%. Therefore there is an upward movement along the the supply curve

C) this event is likely to increase the supply of turkeys because of reduced mortality. Once again the supply curve will be shifting to the right.