Problem
Part I: Determine the impact of each of the following events on the market for the products below shown in italics. For each event show the impact on the Demand or the Supply, Equilibrium Price and the Equilibrium Quantity (i.e. increase or decrease, or no change in Demand or Supply, increase or decrease in equilibrium price and equilibrium quantity or indeterminate). Also, explain which determinant of demand or supply is causing the change. Organic blueberries. The price of organic blueberries decreases Used Cars (inferior good). The economy gets out of a recession and starts growing. Olive oil. Olive oil helps lower bad cholestoral andfrost kills 10% of existing olive trees.
Part II: The following table shows the demand and supply of bottles of premium olive oil for Country ABC. Price Quantity Demanded Quantity Supplied 1.00 18 3 2.00 16 6 3.00 14 9 4.00 12 12 5.00 10 15 6.00 8 15 7.00 6 21
i. If the price of olive oil is $1, describe the situation in the olive oil market. Explain how the price adjusts.
ii. If the price of a olive oil is $7, describe the situation in the olive oil market. Explain.