Question: In Problem, a fire destroys some factories that produce gum and the quantity of gum supplied decreases by 40 million packs a week at each price.
a. Explain what happens in the market for gum and draw a graph to illustrate the changes.
b. If, at the same time as the fire, the teenage population increases and the quantity of gum demanded increases by 40 million packs a week at each price. What is the new market equilibrium? Illustrate these changes on your graph
Problem: The demand and supply schedules for gum are:
Price (cents per bag) Quantity demanded Quantity supplied
(millions of bags per week)
20 180 60
40 140 100
60 100 140
80 60 180
a. Suppose that the price of gum is 70¢ a pack. Describe the situation in the gum market and explain how the price adjusts.
b. Suppose that the price of gum is 30¢ a pack. Describe the situation in the gum market and explain how the price adjusts.