Chapter 4, Problem 1.1P

Subpart (a):

To determine

To illustrate the given situation with supply and demand curves.

Explanation of Solution

Figure 1 illustrates the market equilibrium.

Figure 1 shows the demand and supply curves for the artwork Triple Elvis, which was sold in an auction for $81.9 million. The horizontal axis measures the quantity and the vertical axis measures the price of the commodity. The supply curve is a vertical line because the quantity of the artwork is fixed and unified.

Economics Concept Introduction

Concept introduction:

Demand curve: A demand curve is a graph which shows the quantities of a commodity that the consumers will buy at different price levels.

Supply curve: A supply curve is a graph which shows the quantities of a commodity that the producers are willing to sell at different price levels.

Subpart (b):

To determine

To illustrate the given situation with supply and demand curves.

Explanation of Solution

Figure 2 illustrates the change in market equilibrium.

Figure 2 shows the demand and supply curves for the hogs. The horizontal axis measures the quantity and the vertical axis measures the price of the commodity. The increase in the supply of the hogs has led to a rightward shift of the supply curve, all while the demand remains unchanged. As a result, the equilibrium changes and the prices decrease from 98 cents to 62 cents and the quantity increases from Q₀ to Q_1.

Economics Concept Introduction

Concept introduction:

Demand curve: A demand curve is a graph which shows the quantities of a commodity that the consumers will buy at different price levels.

Supply curve: A supply curve is a graph which shows the quantities of a commodity that the producers are willing to sell at different price levels.

Subpart (c):

To determine

To illustrate the given situation with supply and demand curves.

Explanation of Solution

Figure 3 illustrates the change in market equilibrium.

Figure 3 shows the demand and supply curves for the organic produce. The horizontal axis measures the quantity and the vertical axis measures the price of the commodity.  The initial increase in the demand for organic produce led to the shift of the demand curve from D₀ to D₁. However, the increase in the number of farmers producing the organic produce also increased, leading to an increase in the supply of the product which shifts the supply curve from S₀ to S₁. The combined effect is that the price of organic produce reduces from P₀ to P₁ as the quantity supplied increases from Q₀ to Q₁.

Economics Concept Introduction

Concept introduction:

Demand curve: A demand curve is a graph which shows the quantities of a commodity that the consumers will buy at different price levels.

Supply curve: A supply curve is a graph which shows the quantities of a commodity that the producers are willing to sell at different price levels.