Question:. Each of the following situations is independent of the other situations. For each draw a graph illustrating the situation and do the requested analysis.
a. Consider the market for soft drinks that is initially in equilibrium with a market price of P1 and a market quantity of Q1. Suppose there is a successful campaign to educate the public about the caloric values in soft drinks and their contribution to obesity. At the same time suppose that the price of corn syrup, a key ingredient in many soft drinks, rises. Draw a graph illustrating the initial equilibrium and the new equilibrium after these described changes. Provide a verbal description of the outcome in this market due to these changes.
b. Consider the market for mass transit that is initially in equilibrium with a market price of P1 and a market quantity of Q1. Suppose that after Hurricane Sandy swept through the Atlantic states that New York City officials mandated that all cars coming into New York City must have at least three occupants at all times, otherwise individuals wishing to travel in New York City would need to take mass transit during the weeks of clean-up from this storm. Analyze the impact of this edict from city officials on the market for mass transit. Provide a graph of your analysis and also a verbal description of how the equilibrium price and equilibrium quantity responded to this edict.
c. Consider the market for gasoline that is initially in equilibrium with a market price of P1 and a market quantity of Q1. Suppose that there is a war in the Middle East that disrupts petroleum production (petroleum is a major input to the production of gasoline) while at the same time people’s incomes in the United States increases. Assume gasoline is a normal good. Draw a graph illustrating the initial equilibrium and the new equilibrium after these described changes. Provide a verbal description of the outcome in this market due to these changes.
d. Consider the market for noodles that is initially in equilibrium with a market price of P1 and a market quantity of Q1. Noodles are an inferior good. Suppose that people’s incomes fall due to the financial crisis. Draw a graph illustrating the initial equilibrium and the new equilibrium after the described changes. Provide a verbal description of the outcome in this market due to these changes.