ENGR.ECONOMIC ANALYSIS
ENGR.ECONOMIC ANALYSIS
14th Edition
ISBN: 9780190931919
Author: NEWNAN
Publisher: Oxford University Press
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Consider the market for pens. Suppose that the number of students with an allergy to pencil erasers increases, causing more students to switch from
pendils to pens in school. Moreover, the price of plastic, an important input In pen production, has dropped considerably.
On the following graph, labeled Scenario 1, indicate the effect these two events have on the demand for and supply of pens.
Note: Select and drag one or both of the curves to the desired position. Curves will snap into position, so if you try to move a curve and it snaps back
to Its original position, just drag it a little farther.
A-Z
(?)
Scenarlo 1
10
Supply
Demand
(
7.
Supply
3.
Demand
8
10
3
5
6
1
QUANTITY (Millions of pens)
MacBook Air
PRICE (Dollars per pen)
expand button
Transcribed Image Text:Consider the market for pens. Suppose that the number of students with an allergy to pencil erasers increases, causing more students to switch from pendils to pens in school. Moreover, the price of plastic, an important input In pen production, has dropped considerably. On the following graph, labeled Scenario 1, indicate the effect these two events have on the demand for and supply of pens. Note: Select and drag one or both of the curves to the desired position. Curves will snap into position, so if you try to move a curve and it snaps back to Its original position, just drag it a little farther. A-Z (?) Scenarlo 1 10 Supply Demand ( 7. Supply 3. Demand 8 10 3 5 6 1 QUANTITY (Millions of pens) MacBook Air PRICE (Dollars per pen)
Next, complete the following graph, labeled Scenario 2, by shifting the supply and demand curves in the same way that you did on the Scenario 1
graph.
Scenario 2
10
Supply
Demand
8
7
6.
Supply
Demand
1
2
3
4.
6
7
10
QUANTITY (Millions of pens)
Compare both the Scenario 1 and Scenario 2 graphs. Notice that after completing both graphs, you can now see a difference between them that
wasn't apparent before the shifts because each graph indicates different magnitudes for the supply and demand shifts in the market for pens.
MacBook Air
PRICE (Dollars per pen)
expand button
Transcribed Image Text:Next, complete the following graph, labeled Scenario 2, by shifting the supply and demand curves in the same way that you did on the Scenario 1 graph. Scenario 2 10 Supply Demand 8 7 6. Supply Demand 1 2 3 4. 6 7 10 QUANTITY (Millions of pens) Compare both the Scenario 1 and Scenario 2 graphs. Notice that after completing both graphs, you can now see a difference between them that wasn't apparent before the shifts because each graph indicates different magnitudes for the supply and demand shifts in the market for pens. MacBook Air PRICE (Dollars per pen)
Expert Solution
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Step 1

In the question above, it is given that :

  • Consider a market for pens. 
  • A large number of students shift from pencils to pens due to allergy from pencils. 
  • The price of plastic which is an important input in the production of pens has fallen. 

To find :

  • Effect of these two events on demand and supply curve.
  •  
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