Consider the market for hazelnuts. Use the supply and demand model to explain the effect of the following scenarios on the equilibrium price (P*) and the equilibrium quantity (Q*) of hazelnuts. In each of the following scenarios, does the supply curve shift? Does the demand curve shift? If there is a shift of the supply and/ or the demand curve, in what direction? Show graphically. Does the equilibrium price of hazelnuts increase or decrease? Does the equilibrium quantity of hazelnuts increase or decrease? 1. The price of almonds, a substitute for hazelnuts, decreases significantly. 2. Hazelnut producers discover a method to pick hazelnuts more efficiently which significantly reduces the cost of hazelnut production. 3. Hazelnut consumers’ incomes increase, and a new location where the climate is appropriate for growing lots of hazelnuts has been discovered. Assume that hazelnuts are a normal good
Consider the market for hazelnuts. Use the
Demand is the quantity of a product or service consumers are willing and able to buy at a given price and time. It shows consumers' price-quantity preferences.
Supply is the amount of an item or service that producers are willing to sell at a particular price over a certain time period. It shows how production costs and technology affect a product's price and quantity.
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