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Sketch out a supply and demand diagram for snow tires and explain (comparative statics) what is...

Sketch out a supply and demand diagram for snow tires and explain (comparative statics) what is likely to happen to the price and sales of snow tires in the event of a particularly snowy winter.

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Answer #1

The below graph shows the demand and supply of the snow tires.

The X-axis shows the price of the tires and the Y-axis shows the quantity of the tires demanded. The supply curve S1 and the demand curve D1 meet at point "a". The market is in equilibrium at this point.

In a particularly snowy winter, the demand for the snow tires is going to increase. In the above graph, the demand curve shifted to the right at a higher price and higher demand. The new price is P1 and new quantity is Q2.

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