1. In the following three situations, the market is initially in equilibrium. Explain the changes in either supply or demand that result from each event. After each event described below, does a surplus or shortage exist at the original equilibrium price? What will happen to the equilibrium price as a result?
2015 was a very good year for California wine-grape growers, who produced a bumper crop.
The supply curve shifts rightward. At the original equilibrium price of the year before, the quantity of grapes supplied exceeds the quantity demanded. This is a case of surplus. The price of grapes will fall.
After a hurricane, Florida hoteliers often find that many people cancel their upcoming vacations, leaving them with empty hotel rooms.
The demand curve shifts leftward. At the original equilibrium price, the quantity of hotel rooms supplied exceeds the quantity demanded. This is a case of surplus. The rates for hotel rooms will fall.
After a heavy snowfall, many people want to buy second-hand snowblowers at the local tool shop.
The demand curve for second-hand snowblowers shifts rightward. At the original equilibrium price, the quantity of second-hand snowblowers demanded exceeds the quantity supplied. This is a case of shortage. The equilibrium price of second-hand snowblowers will rise.