You observe the following limited data on the prices and quantities of soccer balls sold in the US:
- Initially, the price of a soccer ball was $50 and 20,000 balls were sold each month.
- Then Pakistan suspended its exports to the US due to growing tensions between the two countries. The price of soccer balls increased to $70 and 16,000 soccerballs were sold.
- Two years later, after the situation between the two countries had cooled down,price and quantity had returned to their initial values. But then, a new study waspublished arguing that children and teenagers playing American Football sufferterrible long-term health consequences. In following months, the price of soccerballs increased by $10 and 25,000 soccer balls were sold.
a) Is the suspension of exports from Pakistan to the US a supply or a demand shock for the soccer ball market in the US? Is the publication of the study a supply or ademand shock for the soccer ball market in the US? Use a standard supply and demandgraph to depict the effects of the suspension of exports from Pakistan to the US andthe publication of the study on the market for soccer balls (draw one graph for thesuspension of exports from Pakistan to the US and a separate graph for the publicationof the study).
b) Based on the data from the supply and demand shocks, what are the estimated supply and demand elasticities starting from the initial price and quantity?