Section+Exercise+5+solns-1

Section+Exercise+5+solns-1 - DepartmentofEconomics 2011

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Department of Economics               Spring  2011 University of California, Berkeley         Economics 1    Head GSI: Swetha  Doraiswamy Section Exercise 5 In the following situations, sketch a supply and demand graph that illustrates the event.  Explain what will happen to supply and demand, equilibrium price, and equilibrium  quantity. 1. Milk: A ban on the use of certain hormones for cows radically lowers the amount of milk  each cow produces. If a ban on the use of certain hormones lowers the amount of milk a cow produces, there  will be a decrease in the supply of milk. The supply curve shifts left. As a result, the equilibrium  price of milk will increase and the equilibrium quantity will decrease.  2. Hotel Rooms: After the Gulf Coast Oil Spill, hoteliers on the Gulf Coast found that many  people cancel their upcoming vacations leaving them with empty hotel rooms. The demand for hotel rooms decrease as a result of the disaster. The demand curve shifts  left. The equilibrium quantity will decrease, and price will decrease.  3. Grapes: 1997 was a very good year for California wine-grape growers, who produced a 
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Section+Exercise+5+solns-1 - DepartmentofEconomics 2011

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