The following events occur in the market for good B, which is a normal good: a) Good B becomes more

Aug 17th, 2016
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The following events occur in the market for good B, which is a normal good: a) Good B becomes more fashionable and popular. b) The price of good C, a substitute for good B, goes down. c) Consumers anticipate declining prices. d) There is a surge in the population that uses good B. e) Income falls for a large subset of consumers who buy good B. Identify the impact of the event to the equilibrium price and quantity of each event. PLEASE DRAW a supporting diagram

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Question--------------The following events occur in the market for good B, which is a normal good:---------------Answer-------------------C) Consumers anticipate declining prices.Question---------------------Identify the impact of the event to the equilibrium price and quantity of each event.PLEASE DRAW a supporting diagram----------------------------------------------Summary -------------------Lets begin this discussion with a single economic event. It might be an event that affectsdemand, like a change in income, population, tastes, prices of substitutes or complements, orexpectations about future prices. It might be an event that affects supply, like a change innatural conditions, input prices, or technology, or government policies that affect production.How does this economic event affect equilibrium price and quantity? We will analyze thisquestion using a four-step process.Step 1. Draw a demand and supply model before the economic change took place. Toestablish the model requires four standard pieces of information: The law of demand, whichtells us the slope of the demand curve; the law of supply, which gives us the slope of thesupply curve; the shift variables for demand; and the shift variables for supply. From thismodel, find the initial equilibrium values for price and quantity.Step 2. Decide whether the economic change being analyzed affects demand or supply. Inother words, does the event refer to something in the list of demand factors or supply fa

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