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Price because of the shortage in a free market

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A June 10, 1996, Wall Street Journal article titled " Americans Eat Up Vitamin E Supplies" discusses the shortage that existed for vitamin E at the time. According to the article, the shortage was created by two changes in the marketplace. First, the supply of soybeans, from which Vitamin E is extracted, declined sharply. Second, a stream of scientific research from mainstream institutions shows that vitamin E helps to ward off such ailments as heart disease and cancer and some symptoms of aging.

A) Using two separate supply and demand graphs, graphically show and verbally explain how a shortage is created by each of the two changes.

B) Explain what eventually happens to price because of the shortage in a free market.

C) Explain how suppliers and buyers adjust their behavior as the shortage is eliminated in each of the two cases.

D) Explain what adjustment may occur in the long run because of these changes.

Reference no: EM131395196

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