(i) In a competitive market, what are the impacts on price, quantity, and the outcomes for producers and consumers, of a shock to marginal cost that hits one sector of suppliers? (Alternatively: consider a shock to the demand side, or the imposition of a tax or subsidy.) How do these impacts depend upon the size of the affected sector, and the properties of supply and demand?

(ii) Describe a real situation in which a sector of supply or demand was or will be hit by a change to costs, to benefits, or to taxes and subsidies. Using your analysis from (i), evaluate the consequences for the market’s participants.

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Lets consider example of lithium as commodity If demands for lithium lets say ... View the full answer