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Suppose that the chicken industry is in long-run equilibrium at a price of $5 per pound of chicken and a quantity of 400 million pounds per year. Suppose that WebMD claims that the bacteria found in chicken will decrease your expected life span by 2 years. WebMD's claim will cause consumers to demand chicken at every price. In the short run, firms will respond by Shift the demand curve, the supply curve, or both on the following diagram to illustrate these short-run effects of WebMD's claim. 10 9 Supply Demand 8 7 Supply Demand 1 80 160 240 320 400 480 560 640 720 800 QUANTITY (Millions of pounds) PRICE (Dollars per pound)

Suppose that the chicken industry is in long-run equilibrium at a price of $5 per pound of chicken and a quantity of 400 million pounds per year. Suppose that WebMD claims that the bacteria found in chicken will decrease your expected life span by 2 years. WebMD's claim will cause consumers to demand chicken at every price. In the short run, firms will respond by Shift the demand curve, the supply curve, or both on the following diagram to illustrate these short-run effects of WebMD's claim. 10 9 Supply Demand 8 7 Supply Demand 1 80 160 240 320 400 480 560 640 720 800 QUANTITY (Millions of pounds) PRICE (Dollars per pound)

ENGR.ECONOMIC ANALYSIS
ENGR.ECONOMIC ANALYSIS
14th Edition
ISBN:9780190931919
Author:NEWNAN
Publisher:NEWNAN
Chapter1: Making Economics Decisions
Section: Chapter Questions
Problem 1QTC
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### Understanding Market Shifts in the Chicken Industry Suppose that the chicken industry is in long-run equilibrium at a price of $5 per pound of chicken and a quantity of 400 million pounds per year. Suppose that WebMD claims that the bacteria found in chicken will decrease your expected life span by 2 years. WebMD's claim will cause consumers to demand [less] chicken at every price. In the short run, firms will respond by [reducing] [price and quantity]. #### Graph Analysis The graph illustrates the supply and demand curves for the chicken industry: - **Vertical Axis (Price):** Measures price in dollars per pound, ranging from $0 to $10. - **Horizontal Axis (Quantity):** Measures quantity in millions of pounds, ranging from 0 to 800. - **Supply Curve:** The upward-sloping orange line indicates that as prices increase, the quantity supplied increases. - **Demand Curve:** The downward-sloping blue line indicates that as prices increase, the quantity demanded decreases. - **Equilibrium Point:** The intersection of the supply and demand curves represents the initial equilibrium at $5 per pound and 400 million pounds. Given WebMD's claim, the demand curve is expected to shift leftward, reflecting a decrease in demand. This shift leads to a new equilibrium with a lower quantity and potentially lower price, reflecting short-run adjustments by firms. Adjust the graph accordingly to visualize this change.
Transcribed Image Text:### Understanding Market Shifts in the Chicken Industry Suppose that the chicken industry is in long-run equilibrium at a price of $5 per pound of chicken and a quantity of 400 million pounds per year. Suppose that WebMD claims that the bacteria found in chicken will decrease your expected life span by 2 years. WebMD's claim will cause consumers to demand [less] chicken at every price. In the short run, firms will respond by [reducing] [price and quantity]. #### Graph Analysis The graph illustrates the supply and demand curves for the chicken industry: - **Vertical Axis (Price):** Measures price in dollars per pound, ranging from $0 to $10. - **Horizontal Axis (Quantity):** Measures quantity in millions of pounds, ranging from 0 to 800. - **Supply Curve:** The upward-sloping orange line indicates that as prices increase, the quantity supplied increases. - **Demand Curve:** The downward-sloping blue line indicates that as prices increase, the quantity demanded decreases. - **Equilibrium Point:** The intersection of the supply and demand curves represents the initial equilibrium at $5 per pound and 400 million pounds. Given WebMD's claim, the demand curve is expected to shift leftward, reflecting a decrease in demand. This shift leads to a new equilibrium with a lower quantity and potentially lower price, reflecting short-run adjustments by firms. Adjust the graph accordingly to visualize this change.
**Text for Educational Website:** In the long run, some firms will respond by _______________ until _______________. Shift the demand curve, the supply curve, or both on the following diagram to illustrate both the short-run effects of WebMD’s claim and the new long-run equilibrium after firms and consumers finish adjusting to the news. **Graph Explanation:** The graph shows a demand curve (blue line) and a supply curve (orange line) with axes labeled as follows: - **X-axis:** Quantity (Millions of pounds), ranging from 0 to 800. - **Y-axis:** Price (Dollars per pound), ranging from 0 to 10. Both curves intersect at a point, marked with dashed black lines extending to the axes, indicating the initial equilibrium price and quantity. To the right of the graph, there are sliders labeled "Demand" and "Supply" to adjust the curves. Below the graph, a drop-down box provides options to describe the long-run supply curve shape in this industry: - Horizontal - Downward sloping - Upward sloping - Vertical The new equilibrium price and quantity suggest that the shape of the long-run supply curve in this industry is _______________ in the long run.
Transcribed Image Text:**Text for Educational Website:** In the long run, some firms will respond by _______________ until _______________. Shift the demand curve, the supply curve, or both on the following diagram to illustrate both the short-run effects of WebMD’s claim and the new long-run equilibrium after firms and consumers finish adjusting to the news. **Graph Explanation:** The graph shows a demand curve (blue line) and a supply curve (orange line) with axes labeled as follows: - **X-axis:** Quantity (Millions of pounds), ranging from 0 to 800. - **Y-axis:** Price (Dollars per pound), ranging from 0 to 10. Both curves intersect at a point, marked with dashed black lines extending to the axes, indicating the initial equilibrium price and quantity. To the right of the graph, there are sliders labeled "Demand" and "Supply" to adjust the curves. Below the graph, a drop-down box provides options to describe the long-run supply curve shape in this industry: - Horizontal - Downward sloping - Upward sloping - Vertical The new equilibrium price and quantity suggest that the shape of the long-run supply curve in this industry is _______________ in the long run.
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