EMBA IIBMS CASE STUDY SOLUTIONS - Suppose that the market demand curve and the market supply curve for broccoli are as shown in the graph below.
EMBA IIBMS CASE STUDY SOLUTIONS - Suppose that the market demand curve and the market supply curve for broccoli are as shown in the graph below.
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Managerial Economics
Case 1.
(a). During the late 1980’s wool prices increased considerably due in part to increased demand by China and the former Soviet Union. From 1977 to 1988, the price of wool for the worsted clothing rose from $3.67 to $5.81 per pound. Expecting that wool prices would remain high, wool producers raised a lot more sheep. Did this result in a shift to the right in the supply curve for wool? Why or why not?
(b). At the same time, the Chinese and Russians cut back on their purchases of wool because of lack of foreign currency (and in the case of China, because of organizational problems). Did this shift the demand curve for wool to the left? Why or why not?
(c). Australia is the world’s largest producer of wool, and for a time the Australian Wool Corporation propped up the price of wool by buying up any unsold Australian wool. Why was this necessary to prevent the price for falling?
(d). The Australian Wool Corporation had to buy so much wool that it exhausted its cash reserves and its credit. The firm turned for help to the Australian Government, but its parliament refused to guarantee further loans to buy up even more surplus wool. In March 1991, the actual price of wool fell to about $2.50 per pound. Why?
True or False
1. No equilibrium price nor equilibrium quantity exists if a good’s demand curve is a vertical line and its supply curve is a horizontal line.
2. The demand curve for a free good (a good with zero prices) must be a horizontal line.
3. If actual price exceeds equilibrium price, there is a tendency for actual price to rise.
4. A shift to the right of the market supply curve tends to increase the equilibrium price.
5. In any market, the seller alone determines the price of the product that is bought and sold. Since the seller has the product, while the buyer does not have it, the buyer must pay what the seller asks.
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| EMBA IIBMS CASE STUDY SOLUTIONS - Suppose that the market demand curve and the market supply curve for broccoli are as shown in the graph below. |
Case 2:
Multiple Choices Questions give reason for the answer:-
1. Suppose that the market demand curve and the market supply curve for broccoli are as shown in the graph below.
| Demand
__________________ |_______________________________
Q Output (tons)
1. If the government sets a price equal to 2P per ton, the result will be,
a. A reduction in the quantity of broccoli supplied.
b. An excess supply of broccoli.
c. A shift to the right of the market supply curve for broccoli.
d. All of the above.
e. None of the above.
2. In the previous question, if a university report indicated the broccoli contains an important ingredient that can help stave off cancer (as infact was indicated in 1992) the result is likely to be,
a. A shift to the right in the market supply curve of broccoli.
b. A shift to the left in the market supply curve of broccoli.
c. A shift to the right in the market demand curve of broccoli.
d. All of the above
For answersheets contact
info.answersheets@gmail.com
+91 95030-94040
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