When only demand or supply changes, it is possible to predict the change inequilibrium prices and quantities in the market. Yet, equilibrium cannot predict theprecise outcome if demand and supply change simultaneously.Read the following scenario and answer the questions that follow.Scenario 2Equilibrium is the condition in the market system when the quantity demanded is equal to thequantity supplied. The equilibrium condition in the market for Rooibos Tea is depicted in thediagram below. PoP5.2EoSoDoQoIn the market for Rooibos tea, the following information is provided:A recent article, "The Magic Powers of Rooibos Tea", made headlines in South Africa. Thearticle provides readers with the significant health benefits of Rooibos Tea endorsed bymedical professionals.Rooibos Tea farmers in South Africa explained that the article influenced the tastes andpreferences of consumers. Yet, at the same time explains that the production of RooibosTea is highly impacted due to a devastating drought that destroyed the majority of rooibosharvests.The farmers explain that devastating drought and the surge in demand occurred simultaneously inthe market.For Scenario 2, answer the following questions:5.1Using three separate graphs, illustrate and explain how simultaneous changes indemand and supply for Rooibos Tea will influence the price and quantity. Youranswer should include three possible outcomes for the simultaneous changes indemand and supply:a) Outcome 1: The relative changes in demand and supply are equal.b) Outcome 2: The relative change in supply is greater than the relative change indemand.c) Outcome 3: The relative change in demand is greater than the relative change insupply.[Important: Clearly name all the curves and label all points and changes onyour graph(s).]Based on your answer in 5.1, what can the farmers conclude regarding theuncertainty of price and quantity following simultaneous changes?

Demand :Demand is when a consumer has the desire to buy something at the price that he is ready to…

For Scenario 2, answer the following questions: 5.1 Using three separate graphs, illustrate and explain how simultaneous changes in demand and supply for Rooibos Tea will influence the price and quantity. Your answer should include three possible outcomes for the simultaneous changes in demand and supply: a) Outcome 1: The relative changes in demand and supply are equal. b) Outcome 2: The relative change in supply is greater than the relative change in demand. 5.2 c) Outcome 3: The relative change in demand is greater than the relative change in supply. [Important: Clearly name all the curves and label all points and changes on your graph(s).] Based on your answer in 5.1, what can the farmers conclude regarding the uncertainty of price and quantity following simultaneous changes?

For Scenario 2, answer the following questions: 5.1 Using three separate graphs, illustrate and explain how simultaneous changes in demand and supply for Rooibos Tea will influence the price and quantity. Your answer should include three possible outcomes for the simultaneous changes in demand and supply: a) Outcome 1: The relative changes in demand and supply are equal. b) Outcome 2: The relative change in supply is greater than the relative change in demand. 5.2 c) Outcome 3: The relative change in demand is greater than the relative change in supply. [Important: Clearly name all the curves and label all points and changes on your graph(s).] Based on your answer in 5.1, what can the farmers conclude regarding the uncertainty of price and quantity following simultaneous changes?

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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