Economics: Other Economics Problems – #29382


Question: Question 2:

The article reproduced below, The Hot Pursuit of Kale and Its Trendy Friends, and Rumors of Shortages (published by the New York Times this past August), discusses supply and demand factors related to the markets for several foods (kale, quinoa, chia and almonds).

Part A: For each food market, list all the factors that the article mentions. Then, for each factor, show in a supply and demand diagram and discuss in words how, holding all other factors constant, a change in that factor will affect the equilibrium price and quantity.

Part B: The article mentions “rumors of shortages” of kale. We learned that in the free market, shortages do not exist since prices adjust to equate the quantity supplied and the quantity demanded. Provide an example of a market in which government policy leads to a shortage of a good or service; describe the main objective of the policy. Draw a detailed supply and demand diagram to illustrate the shortage. Explain in words why the shortage exists.

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