3.1 Questions from Chapter 15 (Firms in Competitive Markets)
Attempts 3.5 Keep the Highest 3.5/5
8. Short-run and long-run effects of a shift in demand
Suppose that the seitan industry is initially operating in long-run equilibrium at a price level of $5 per pound of seitan and quantity of 100 million
pounds per year. Suppose that the Food and Drug Administration (FDA) reports that compounds naturally occurring in seitan help to prevent chronic
illness.
The FDA's research is expected to cause consumers to demand less seitan at every price. In the short run, firms will respond by
Shift the demand curve, the supply curve, or both on the following graph to illustrate these short-run effects of the FDA's research.
PRICE (Dollars per pound)
10
9
8
7
6
5
4
3
2
1
0
0 20 40 60 80 100 120 140 160 180 200
QUANTITY (Millions of pounds)
In the long run, some firms will respond by
Supply
Demand
Supply
Demand
until