How is each of the following events likely to shift the supply curve or the dema
ID: 1167416 • Letter: H
Question
How is each of the following events likely to shift the supply curve or the demand curve for fast-food hamburgers in the United States? Make sure you indicate which curve (curves) is affected and if it shifts out or in.
a. The price of beef triples.
b. The price of chicken falls by half.
c. The number of teenagers in the economy falls due to population aging.
d. Mad cow disease, a rare but fatal medical condition caused by eating tainted beef, be-comes common in the United States.
e. The Food and Drug Administration publishes a report stating that a certain weight-loss diet, which encourages the intake of large amounts of meat, is dangerous to one’s health.
f. An inexpensive new grill for home use that makes delicious hamburgers is heavily adver-tised on television.
g. The dollar rises relative to foreign currencies, so that it becomes expensive for foreign tour-ists to travel to the United States on vacation.
h. The minimum wage rises.
Explanation / Answer
(Questions (a), (b), (d) assumes that main ingredient of hamburgers is beef. I belong from India where main ingredient is always chicken, therefore made this explicit assumption).
(a) Increase in beef price will treble the input cost of hamburgers. So, producers will make less number of burgers & quantity supplied will decrease.
Supply curve will shift inward toward left.
(b) Chicken is a substitute for beef. When chicken price halves, producers will substitute cheaper chicken with costlier beef, and therefore, their cost of producing burgers will decrease. Hence they will supply more.
Supply curve will shift rightward.
(c) Teenagers are prime customer segment of burgers. A reduced customer base will reduce the quantity demanded.
Demand curve will shift up & leftward.
(d) Contaminated input will cause fear in minds of buyers who will lower their demand. Demand curve will shift up & leftward.
(e) FDA publishes that large meat intake is dangerous for health. This will decrease meat-based food demand & Quantity demanded will decrease & demand curve will shift up, towards left.
(f) If the advertisement is effective, people will make burgers at home instead of purchasing from stores. Quantity demanded will decrease & demand curve will shift up, towards left.
(g) if less foreign tourists come to US, the burger demand from tourists will decrease. Quantity demanded will decrease & demand curve will shift up, towards left.
(h) Increased minimum wage will increase the input cost of hamburgers. So, producers will make less number of burgers & quantity supplied will decrease.
Supply curve will shift inward toward left.