Directions: Draw a Supply and Demand graph for the good in parentheses for each question. Label the original equilibrium price (P) and equilibrium quantity (Q). Then, read each scenario. Decide how supply and/or demand will change. Illustrate any shifts in supply or demand on the graph. Label your new P and Q. Next to each graph, write: 1) If demand increases/decreases/stays the same, 2) The determinant of demand (if applicable), 3) If supply increases/decreases/stays the same, 4) The determinant of supply (if applicable), 5) If the new P increases/decreases/is indeterminate, and 6) If the new Q increases/decreases/is indeterminate.
1) The government has placed a tax on restaurants serving foods high trans fat and saturated fat. People have found out that foods high in trans fat and saturated fat are harmful to one’s health (fast food).