Problem: Movements Versus Shifts

For each of the following statements, determine whether there has been a change in supply or change in quantity supplied. Draw a demand and supply diagram for each situation to show either a movement along the supply curve or a shift of the supply curve.

(a) The price of Canadian-grown peaches skyrockets during an unusually cold summer that reduces the size of the peach harvest.

(b) An increase in income leads to an increase in the price of beef and also to an increase beef sales.

(c) Technological improvements in the microchip lead to price reductions for personal computers and an increase in computer sales.

(d) Greater awareness of the health risks from smoking lead to a reduction in the price of cigarettes and to fewer cigarettes being sold.

Because bagels and cream cheese are often eaten together, they are complements.

(a) We observe that both the equilibrium price of cream cheese and the equilibrium quantity of bagels have risen. What could be  responsible for this pattern ña fall in the price of flour or a fall in the price of milk? Illustrate and explain your answer.

(b) Suppose instead that the equilibrium price of cream cheese has risen but the equilibrium quantity of bagels has fallen. What could be responsible for this pattern ña rise in the price of flour or a rise in the price of milk? Illustrate and explain your answer. (Hint: flour and milk are inputs for bagels and cream cheese, respectively).