Chapter $4$ Problems

Decker

ECON$200$

$2.$ Imagine the following scenarios that involve a major $($large$)$ event and a minor $($small$)$ event. For each problem, draw a supply and demand graph the depicts the impact on Price and Quantity from both events. In addition, briefly explain, in sentence form, the impact. Keep in mind that both events are happening $\text{'}$at the same time' and therefore should be drawn on the same graph. $(6$ points each$)$

a$)$ Market: Rock Salt

Major Event: A bitterly cold and unusually snowy winter season has significantly depleted the amount of available rock salt.

Minor Event: There is another snowstorm, roads and sidewalks need to be salted.

b$)$ Market: Stanley Mugs

Major Event: For some reason, Stanley thermos mugs are suddenly extremely popular.

Minor Event: Stanley has recently invested in new manufacturing capabilities that have allowed them to produce these mugs faster than ever before.

c$)$ Market: Canned Tomatoes

Major Event: A canned tomato manufacturer begins to use cheap imported tomatoes from Mexico rather than more expensive domestic tomatoes.

Minor Event: This causes a public relations fiasco, resulting in an organized effort to boycott canned tomatoes.