Questions:
1. Use the demand and supply framework to qualitatively analyse the market in
each of the scenarios given in a) through f). How would the demand and/or
supply curves shift? (Leftward/rightward/no shift) Summarize the result in the
following format under table 1.
a. A recent study claims that the tapioca pearls in bubble tea are linked to
increase risk for cancer, creating fear among consumers.
b. In addition to the study report in a), you are also told that fruit smoothies
are good alternatives to bubble tea. At the same time, you know that the
extended summer has invigorated fruit harvests.
C. Teaching assistants consider microwaveable meals an inferior good. This
semester, they are greeted with bad news as the Department of
Economics cuts their stipends by 15%.
d. Wisconsin produces fine cheese using cow's milk; however, mad cow
disease has wiped out half the population of cows in Wisconsin.
e. Banana Inc. introduces the latest incarnation of its smartphone, the
jPhone 6. A flood of consumers rush to order this famous smartphone. At
the same time; however, the production line of Banana Inc. is plagued by
riots, cutting production in half.
f. The economic slump and oil shocks have caused consumers to delay
excessive spending, particularly, the purchase of exotic supercars.
Automobile firms correctly anticipate the economic crisis and cut down
production of exotic models.
Table 1:
| | Market | Demand curve | Supply curve |
| :---- | :--------------- | :----------- | :----------- |
| a. | Bubble tea | | |
| b. | Fruit smoothies | | |
| C. | Microwave meal | | |
| d. | Cheese | | |
| e. | iPhone 6 smartphones | | |
| f. | Cars | | |
[12 marks]
