Answer in Microeconomics for Elicis #174696
Using supply and demand analysis explain the effect on the equilibrium price and quantity of
lamb meat in country X of each of the following events.
a) A fall in the price of chickens.
b) The introduction of a sales tax on all meat sold.
c) The imposition of a maximum price (or ceiling price) for lamb.
a) A fall in price of chicken results to a rise in supply of chicken because of increased number of chicken demanded. The equilibrium price decreases increasing the number of chicken demanded.
b) The introduction of a sales tax on all meat sold results to a higher income of goods causing the equilibrium price to fall and the quantity of meat demanded to reduce.
c) The imposition of maximum price for lamb will lead to a shortage of the lamb. When price ceiling is less than the equilibrium price, the amount of lamb demanded will be more than the the amount of lamb supplied.