instructions: read the following scenarios and answer the question in the space provided.\nscenario\nsoybean…
instructions: read the following scenarios and answer the question in the space provided.\nscenario\nsoybean oil can now be used as a renewable ingredient in the production of biodiesel fuel.\nwheat is grown primarily to be ground into flour. drought results in low wheat yields.\nthe bird flu infects thousands of egg farms, and many laying hens are lost.\nthe nutrition of feed for dairy cows improves, leading to a significant increase in milk production.\ngraph (draw original supply + demand lines, add the shift, be sure to mark s and d and d² or s² as needed, plus equilibrium points)\nsupply or demand change? (circle)\nprice - ↑ or ↓\nquantity - ↑ or ↓\nwhy is there a change? (merit)\nsupply\n↑\n↑\nincreased profitability\ndemand\n↓\n↓\nless alternative uses for demand\nsupply\n↑\n↑\nsupply reduce potential price induced\ndemand\n↓\n↓\nsupply\n↑\n↑\nsupply reduced demand reduced\ndemand\n↓\n↓\nsupply\n↑\n↑\nmore production\ndemand\n↓\n↓
Answer
Explanation:
Step1: Analyze soybean - oil case
The new use of soybean - oil in biodiesel production increases its profitability for producers, so supply increases (shift of supply curve to the right). At the same time, as it is used more for biodiesel production, there is less for other uses, so demand for its other uses decreases (shift of demand curve to the left).
Step2: Analyze wheat case
Drought reduces wheat yields. This leads to a decrease in supply (shift of supply curve to the left). Assuming no major changes in factors affecting demand immediately, demand remains relatively constant in the short - run, but the text has a wrong marking of demand decrease. In reality, with supply reduction, price increases and quantity decreases.
Step3: Analyze egg case
Bird - flu infecting egg farms reduces the number of laying hens, so supply of eggs decreases (shift of supply curve to the left). Also, consumers may be less willing to buy eggs due to health concerns, so demand decreases (shift of demand curve to the left).
Step4: Analyze milk case
Improved nutrition of dairy - cow feed leads to more milk production, so supply increases (shift of supply curve to the right). Assuming no major immediate changes in factors affecting demand, demand remains relatively constant in the short - run, but the text has a wrong marking of demand decrease. In reality, with supply increase, price decreases and quantity increases.
Answer:
| Scenario | Supply or Demand Change (Circle) | Price (↑ or ↓) | Quantity (↑ or ↓) | Why is there a change? |
|---|---|---|---|---|
| Soybean oil | Supply (↑), Demand (↓) | Depends on magnitude of shifts. If supply shift is larger, price ↓; if demand shift is larger, price ↑ | Depends on magnitude of shifts | Increased profitability for supply, less for other uses for demand |
| Wheat | Supply (↓), Demand (constant in short - run) | ↑ | ↓ | Supply reduced due to drought |
| Eggs | Supply (↓), Demand (↓) | Depends on magnitude of shifts | Depends on magnitude of shifts | Supply reduced due to bird - flu, demand reduced due to health concerns |
| Milk | Supply (↑), Demand (constant in short - run) | ↓ | ↑ | More production due to improved feed nutrition |