Pearl Market Scenario: You go on vacation for 14 days to an island in the middle of the ocean that is known for selling beautiful pearls. On day 1 of your vacation, you buy 10 small pearls for $10 from the 100 pearls available. The next day, there is a storm that destroys the boats in the area, including the pearl divers’ boats. The day you leave, you return to the pearl market and ask to buy 1 more pearl. a. Do you think that the price of pearls will increase, decrease or stay the same? Why? b. Draw 1 diagram showing the supply and demand for pearls on the island before and after the storm. On the same diagram, show the shift of the supply or demand curve to the proper location. c. Use your diagram and principles of supply and demand to explain your estimated price for pearls on the last day of your vacation.
Answer the questions on the right based on the following scenario:
Pearl Market Scenario: You go on vacation for 14 days to an island in the middle of the ocean that is known for selling beautiful pearls. On day 1 of your vacation, you buy 10 small pearls for $10 from the 100 pearls available. The next day, there is a storm that destroys the boats in the area, including the pearl divers’ boats. The day you leave, you return to the pearl market and ask to buy 1 more pearl.
a. Do you think that the price of pearls will increase, decrease or stay the same? Why?
b. Draw 1 diagram showing the supply and demand for pearls on the island before and after the storm. On the same diagram, show the shift of the supply or demand curve to the proper location.
c. Use your diagram and principles of supply and demand to explain your estimated price for pearls on the last day of your vacation.
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