Question

Question -:For each market whose product is highlighted in italics, identify whether demand or supply is increasing or decreasing. In each case, identify the demand or supply factor causing the change. In which direction does the demand or supply curve shift?

a. Medical researchers discover that consumption of blueberries reduces the risk of cancer

b. New automated equipment is introduced in the production of tea.

c. A significant rise in the price of game consoles affects the market for computer games.

d. Higher prices for grazing land have an impact on the production of wool.

Answer 1

a. Here the demand for blueberries will increase. The factor here is research and media which has increased people's affinity towards consuming blueberry. It is now percieved to be more desirable due to the researched health benefits. The demand curve shfts rightwards. This would increase price and quantity.

b. Here the supply of tea will increase becuase of newer technological innovation. The supply curve will shift right, increasing quantity and decreasing price.

c. Gaming consoles and computer games are substitutes. An increase in price of substitute will increase demand for the other good. Hence demand for computer games increases. The demand curve shifts rightwards.

d. Sheeps are needed for wool production. Raising sheeps are input costs. As grazing prices increases, this means input cost increases for production of wool. This decreases the supply. Supply curve shifts leftwards causing price to rise and quantity to decrease.