Question

Hi There! I need short and clean answers from these questions and please make sure your writing is clear and understandable if you decide to write the answer. The answer can be simple, so I can understand it. Thank you!

1-Using the supply and demand model, graphically show the effect of each of the following changes on the equilibrium price and quantity in the market for bacon:
-A decrease in the price of sausage links (explain any assumptions you make)

-An increase in the price of corn, which is fed to pigs (explain any assumptions you make).

-An increase in the average income of consumers (explain any assumptions you make).

-The introduction of a price floor on bacon

Answer 1

1. Sausage is substitute for bacon. So decrease in its price will lead to fall in demand for bacon. So price and quantity of bacon will fall.

2. Corn is input. Increase in cost of corn will leads to higher cost, leading to fall in supply. Price of bacon will rise and quantity will fall.

3. Bacon is a normal good. INcrease in income will lead to higher demand for bacon. So price and quantity of bacon will rise.

4. Introduction of price floor for bacon will lead to surplus of bacon.

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