Reference no: EM131611732

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.