Question

namejennifer castillo b. period 9 - 15 - 25 supply and demand practice set instructions: read the following scenarios and answer the question in the space provided. scenario graph (draw original supply + demand lines, add the shift, be sure to mark s and d and d² or s² as needed, plus equilibrium points) supply or demand change? (circle) price - ↑ or ↓ quantity - ↑ or ↓ why is there a change? (merit) soybean oil can now be used as a renewable ingredient in the production of biodiesel fuel.

Explanation:

Step1: Analyze supply change

The new use of soybean - oil as a renewable ingredient in biodiesel production increases its profitability for producers. So, producers will want to supply more. Supply curve shifts right, increasing quantity supplied and decreasing price in the absence of demand change. But here both supply and demand are considered. When supply increases (shift to the right), quantity supplied increases and price tends to decrease from a supply - side perspective.

Step2: Analyze demand change

The new use of soybean - oil might also attract new consumers in the biodiesel - related market. However, the table shows a decrease in demand. A decrease in demand (shift to the left) will lead to a decrease in both price and quantity demanded.

Step3: Net effect

The overall effect on price depends on the magnitude of the supply and demand shifts. But since supply increases and demand decreases, quantity supplied increases due to supply shift and quantity demanded decreases due to demand shift. Overall, the quantity change is ambiguous without knowing the magnitudes of shifts, but here the table shows quantity decreasing. The price decreases because the decrease in demand and increase in supply both put downward pressure on price.

Answer:

Supply change is due to increased profitability for producers from new use in biodiesel. Demand change might be due to various factors like substitution effects in other uses of soybean - oil or changes in consumer preferences related to non - biodiesel uses. The price decreases and quantity decreases as shown in the table based on the combined effect of supply increase and demand decrease.