PS3_Essay (sol)

PS3_Essay (sol) - happens to the Price and Quantity of Tofu...

Info iconThis preview shows pages 1–14. Sign up to view the full content.

View Full Document Right Arrow Icon
ECON 1001 Essay Problem Set #3
Background image of page 1

Info iconThis preview has intentionally blurred sections. Sign up to view the full version.

View Full DocumentRight Arrow Icon
Suppose we are in the United States. 25 years ago, Tofu was only available among the Asian communities in some cities (China Town). And only mostly Asians consumed Tofu. Also, only small Asian businesses produced Tofu.
Background image of page 2
From the information above, we can start by drawing a Demand-Supply diagram like this: Price Quantity S D Q 0 P 0
Background image of page 3

Info iconThis preview has intentionally blurred sections. Sign up to view the full version.

View Full DocumentRight Arrow Icon
Current Tofu consumption… People nowadays have become more health-conscious. Tofu is now widely consumed by the general public in the US. (not just Asians) because it is a high-protein health food. What does that imply? Demand for Tofu rises!
Background image of page 4
Price Quantity D D’
Background image of page 5

Info iconThis preview has intentionally blurred sections. Sign up to view the full version.

View Full DocumentRight Arrow Icon
How about the supply side? ‘Tofu production has evolved to become factory-based using modern food- processing technologies.’ What does it mean? Supply of Tofu also rises!
Background image of page 6
Price Quantity S S’
Background image of page 7

Info iconThis preview has intentionally blurred sections. Sign up to view the full version.

View Full DocumentRight Arrow Icon
If both Demand and Supply increase, what
Background image of page 8
Background image of page 9

Info iconThis preview has intentionally blurred sections. Sign up to view the full version.

View Full DocumentRight Arrow Icon
Background image of page 10
Background image of page 11

Info iconThis preview has intentionally blurred sections. Sign up to view the full version.

View Full DocumentRight Arrow Icon
Background image of page 12
Background image of page 13

Info iconThis preview has intentionally blurred sections. Sign up to view the full version.

View Full DocumentRight Arrow Icon
Background image of page 14
This is the end of the preview. Sign up to access the rest of the document.

Unformatted text preview: happens to the Price and Quantity of Tofu transacted? • Depending on exactly how much the Demand and Supply are, there are 3 possible outcomes • Let’s illustrate these by using diagrams. Scenario A Price Quantity S D Q P D’ S’ Q 1 P 1 • In this case, Quantity transacted increases. • Quantity increases from Q to Q 1 . • Price of Tofu also increases. • Price increases from P to P 1 . Scenario B Price Quantity S D Q P S’ D’ Q 1 P 1 • Again, Quantity transacted increases. • Quantity increases from Q to Q 1 . • However, Price drops. • Price decreases from P to P 1 . Scenario C Price Quantity S D Q P S’ D’ Q 1 • In this case, even though both Demand and Supply increase, • The Price of Tofu remains at P . • Quantity transacted increases, from Q to Q 1 ....
View Full Document

This note was uploaded on 10/02/2011 for the course ECON 1001 taught by Professor S.c during the Spring '10 term at HKU.

Page1 / 14

PS3_Essay (sol) - happens to the Price and Quantity of Tofu...

This preview shows document pages 1 - 14. Sign up to view the full document.

View Full Document Right Arrow Icon
Ask a homework question - tutors are online