Im trying to get through some economics questions so im prepared for
my test. The questions posted are the ones I have been having some
trouble with. Please Answer them and include graphs wherever they
would be helpful in explaining the question proposed.

I need an answer by 4/7 at 3:30-4:00PM... please leave a message here
if you have any questions, and tell me if the amount the question is
priced at needs revision. Thanks!

What happens to the demand for anchovies, the quantity of anchovies
demanded, the supply of anchovies and the quantity of anchovies
supplied when the price of soybeans decreases dramatically.  For
purposes of your answer, assume anchovies and soybeans are both used
as a high protein food product.

Hi linked2net!!


Because anchovies and soybeans are both rich in protein, you can
consider, for the purposes of this problem, as substitute goods.
Note that for substitute goods X and Y "an increase (decrease) in the
price of good X leads to an increase (decrease) in the consumption of
good Y."

In this case (considering both products as substitute goods) if the
price of soybeans decreases dramatically, then its demand is shifted
from other substitutes which are relatively more expensive. That means
the demand for anchovies will fall.
A decrease in the price of a substitute good (soybeans) causes a
decrease in demand (of the anchovies) and a leftward shift of the
(anchovies') demand curve. With the lower price, buyers buy more of
the substitute good and less of this good. That means at the same
price the quantity of anchovies demanded will fall.
Note that the decrease of the price of the soybeans makes the supply
of anchovies relatively more profitable than the supply of soybeans,
this will cause producers to reallocate resources to produce large
quantities of the more profitable goods (anchovies), in this case the
supply curve of anchovies will be shifted to the right. This will
cause in the future, in combination of the demand curve shift, to
lower the anchovies' equilibrium price, we cannot predict the new
equilibrium quantity.

In regards of the soybeans curves we can say the following:
The demand curve will be shifted to the right, because its demand is
shifted from other substitutes which are relatively more expensive.
The supply curve will be shifted to the left, because producers will
reallocate resources to produce large quantities of the more
profitable goods (anchovies) producing less soybeans.

Note: all of these changes can produce a shortage of soybeans in the
future, making its price to rise faster, and a surplus of anchovies,
making its price to low faster; this shows how the market forces react
trying to restore the initial state.

For reference I suggest you to visit the following pages from NetMBA.com:
"Demand Curve":
http://www.netmba.com/econ/micro/demand/curve/

"Supply Curve":
http://www.netmba.com/econ/micro/supply/curve/

"Supply and Demand":
http://www.netmba.com/econ/micro/supply-demand/


I hope this helps you. Feel free to use the clarification feature to
request further assistance if it needed, I will be glad to respond
your requests.


Best Regards.
livioflores-ga