ECO 305 Lecture Notes - Lecture 1: Oatmeal, Economic Equilibrium, Normal Good

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26 May 2018
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First homework Econ 305 Due date: 1/17/2018
1. The market for oatmeal is in equilibrium. However, the future is very uncertain and
farmer Pete is trying to weigh all the possibilities. Help him out by matching the graphs
with the events that might occur. (70 points)
A a). A disease hits oat crops throughout the country.
A b). A disease hits cows and drastically increases the price of milk.
C c) Oatmeal is found to lower cholesterol.
B d) Income tax rates fall sharply on consumers and oatmeal is a normal
good.
A e) Fertilizer costs double.
B f) Cream of Wheat is beginning an all-out advertising blitz.
D g) Farming as a way of life becomes popular
(A) (B)
Price Price
S’
S S
D D D
Quantity Quantity
(C) (D)
Price Price
S S
S’
Quantity Quantity
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