Suppose good A is a normal which is considered good for people's health and that good A is also price inelastic. A. Draw a demand and supply diagram for good A and label the equilibrium point(E₁), the equilibrium price(Pe) and the equilibrium quantity(Qel) B. Suppose there is natural disaster that destroy some of the suppliers at the same time that people realize they need more of good A to assure them of maintaining their good health. Draw the new demand and new supply curves and label the new equilibrium point(E2), the new equilibrium price (P.2) and new equilibrium quantity (Qe2) C. Describe the difference between the old and the new equilibrium points and explain what happens.

Q&A Education