1) Shift the curve to show what will occur in the milk industry if technological progress makes it cheaper and easier to produce milk.
draw the market and label the initial price and quantity PE and QE,
decide which group (consumers or producers) is affected most directly and immediately then shift the curve
label the new price and quantity
compare the new Price and Quantity with the initial price and quantity
2) Market for Tutoring services.
P
QD
QS
QS’
$5
100
20
10
80
40
15
60
60
20
40
80
25
20
100
Graph the Demand and supply curve (make sure to label the graph properly)
Show the equilibrium price and quantity
Show on the graph the shortage and surplus areas
Assume baby-sitting cost went down, and the supply increased by 40 hours at each price.
Show the new supply table in the provided space (Qs’)
Graph the new supply curve and show the new equilibrium
Full Answer Section
Affected group: Consumers are most directly and immediately affected by the shift in the supply curve.
New price and quantity: The new price, P'E', is lower than the initial price, PE. The new quantity, Q'E', is higher than the initial quantity, QE.
Comparison of new and initial price and quantity: The new price is lower than the initial price, and the new quantity is higher than the initial quantity. This means that consumers are better off under the new market conditions.
Overall effect: Technological progress in the milk industry makes it cheaper and easier to produce milk. This leads to an increase in the supply of milk and a decrease in the price of milk. Consumers are the group that is most directly and immediately affected by this shift, and they are better off under the new market conditions.
Additional notes:
- The shift in the supply curve is likely to be gradual, as it takes time for new technologies to be adopted and implemented.
- The magnitude of the shift in the supply curve will depend on the specific technological advances that are made.
- The impact of the shift in the supply curve on consumers and producers will also depend on the elasticity of demand and supply for milk.
- The government may play a role in the milk industry through price supports, subsidies, or other policies. These policies can affect the market price of milk and the distribution of benefits between consumers and producers.
Sample Answer
Technological progress: Technological progress makes it cheaper and easier to produce milk. This means that the supply of milk increases.
Shift in the supply curve: The supply curve shifts to the right, indicating an increase in the supply of milk.