MPA – 111 Economics and Public Policy I

Assignment I

No – I MPA 2
Name – Aung Kaung Myat

1.For each of the following statements, draw a diagram that

illustrates the likely effect on the market for eggs. Indicate in
each case the impact on equilibrium price and equilibrium
quantity.
a. A surgeon general warns that high-cholesterol foods cause heart attacks.

b. The price of bacon, a complementary product, decreases.

c. An increase in the price of chicken feed occurs.

d. Caesar salads become trendy at dinner parties. (The dressing is

made with raw eggs.)

e. A technological innovation reduces egg breakage during packing.

Answer:

a. A surgeon general warns that high-cholesterol foods cause heart attacks.

Prices $ D1 S1
D2

E1

P1
E2
P2

Q2 Q1 Quantity Unit

a. A surgeon general warns that high-cholesterol foods cause heart attacks. Therefore, it
will lead to a decrease in demand of eggs and the demand curve will shift to the left
D2. The equilibrium price and quantity demand will be decrease.
 MPA – 111 Economics and Public Policy I
Assignment I
b. The price of bacon, a complementary product, decreases.

Prices $ D2

D1 S1
E2

P2
E1
P1

Quantity Unit
Q1 Q2

b. The price of bacon, a complementary product, decreases. So, the demand of eggs
is increase and the demand curve will shift to the right D2. As a result, both
equilibrium price and quantity will be increase.

c. An increase in the price of chicken feed occurs.

S2
Prices $ D1 S1

E2
P2 E1

P1

Quantity Unit
Q2 Q1

c. An increase in the price of chicken feed occurs. This causes the supply of eggs
decrease and the supply curve will shift to the left S2. The price is increase from P1 to P2
and the quantity is decrease from Q1 to Q2.
 MPA – 111 Economics and Public Policy I
Assignment I
d. Caesar salads become trendy at dinner parties. (The dressing is made with raw eggs.)

Prices $ D2

D1 S1
E2

P2
E1
P1

Quantity Unit
Q1 Q2

d. Caesar salads become trendy at dinner parties. (The dressing is made with raw eggs.)
So, the demand of eggs will increase and shifting the demand curve to the right D2. Both
equilibrium price and quantity will be increase too.

e. A technological innovation reduces egg breakage during packing.

Prices $ D1 S1 S2

E1
P1
E2
P2

Q1 Q2 Quantity Unit

e. A technological innovation reduces egg breakage during packing. This will lead to an
increase in supply of eggs and shifting the supply curve to the right S2. The equilibrium
price is decrease and the quantity is increase.
 MPA – 111 Economics and Public Policy I
Assignment I
2.The following table represents the market for disposable digital cameras. Plot this data on a
supply and demand graph and identify the equilibrium price and quantity. Explain what
would happen if the market price is set at $30, and show this on the graph. Explain what
would happen if the market price is set at
$15, and show this on the graph.

Answer:

Price $

35 D S
30

25 E
20

15

10

0 5 10 15 20 Quantity Unit

Equilibrium Price = 20 Equilibrium

Quantity = 9
If the market price is set at $ 30, Qd = 5 < Qs = 15, Surplus of
Supply = 10 If the market price is set at $ 15, Qd = 11 > Qs = 6,
Shortage of Supply = 5
 MPA – 111 Economics and Public Policy I
Assignment I
3. The market for manicures is made up of five firms, and the data in the following table
represents each firm’s quantity supplied at various prices. Fill in the column for the
quantity supplied in the market, and draw a supply graph showing the market data.

Answer:

Quantity supplied by:

PRICE FIRM A FIRM B FIRM C FIRM D FIRM E MARKET
$ 10 3 2 0 2 4 11
20 4 4 2 3 5 18
30 5 6 3 4 7 25
40 6 8 5 5 8 32

price

S
$40

$30

$20

$10

11 18 25 32 QTY

Supply graph of the market data for

manicures
MPA – 111 Economics and Public Policy I
Assignment I