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JiTT Example 2

Problem 15, Chapter 4 The Market for Tofu in the U.S.

Rather than drawing the demand/supply curves, explain the shifts in demand and supply that have occurred in the tofu market over the past 25 years, according to the information provided. What does the demand/supply model predict about changes in the volume of tofu sold in the U.S. between then and now? What does the demand/supply model predict about changes in the price of tofu during this period? Explain.

How can these responses be improved?

1. The supply curve will swift to the left The demand curve will swift to the right. The volume of Tofu sold in the US will greatly increase because of the popularity and the high levels of protein in the good. Marketplaces will stock their selves with Tofu because their opportunity costs of selling Tofu will be lower than that of other goods. The price of Tofu will increase also. That will happen so the supply will not be lower than the demand. If the price were low customers would buy multiple containers of Tofu, leaving other customers with nothing. The price will limit the amount of Tofu that each individual buys.

2. The demand and supply curves change drastically. After the popularity of tofu increased, the demand curve would of course shift because it increases. Because the demand curve increases, in turn the supply curve increases. In the beginning the supply and demand curves are both low because the tofu is available in small numbers. This means that the volume of tofu sold in the U.S. greatly increased in 25 years. In turn, the price of the tofu during this period increased. This is because as the demand curve is shifted out the quantity and price both increase.

3. Since 25 years ago, the demand for tofu has increased. Also, the supply for tofu has increased. Therefore, both the demand curve and the supply curve have shifted to the right. The supply curve has shifted because of the improved technology that has allowed the cost of producing tofu to decrease. The demand curve has shifted because of the increase in the consumers who are subject to consuming tofu. Because tofu is now available to more than just small businesses operating in Chinese quarters and it is a high protein health food, more people want to consume it. The demand/supply model shows that the volume of tofu has increased since then. The demand has become larger so the supply had to as well. The model also predicts that the prices of tofu increased during this period because consumers wanted the tofu and were willing to pay the increase. The suppliers were able to increase the price because they knew that the consumers would still pay for it as long as the demand was still high or increasing.

4. According to the supply and demand curves, tofu’s demand was steadily increasing for 25 years; therefore the supply for tofu was steadily increased due to the wants of consumers. Now, if we want to consider the price and volume produced, we must make a logical assumption that tofu will continue to be produced in large amounts if the producers are receiving a large enough price that is sufficient to cover the opportunity cost of supplying tofu. As the price of the tofu increases the price will slowly rise as the supply curve moves the left. Since technology is improving by leaps and bounds, this should help lower the cost of tofu. If the volume of tofu decreases at any point in time, so will the price, due to the fact that it will be cheaper to produce in smaller quantities. If we were to predict a good price and quantity to sell tofu at; consider the equilibrium price, which is the intersection of the supply and demand curves.

5. “Tofu was available 25 years ago only from small businesses operating in Chinese quarters of large cities. Today Tofu has become popular as a high-protein health food and is widely available in supermarkets throughout the United States.” With this introductory information, one will be able to say that with the rise of availability and popularity of Tofu the demand/supply curves will shift. Twenty-five years ago the demand for Tofu was not very high because it was restricted as far as production and availability in the U.S. As a result, the demand curve was relatively lower than it is today. With an increase in availability and production, the demand curve has shifted outward to the right while the supply curve has shifted outward/downward and to the right. Both of these descriptions indicate an increase in supply and demand. The cause of the supply curve shift is the increase in production. Where Tofu use to be only available in small businesses of China, now it is in virtually every supermarket in the United States. The information given predicts that an increase in demand will spark an increase in production and price. The more a good or service is demanded, the more it has to be produced. Companies are more willing to sell Tofu now than they were 25 years ago. The changes in the Tofu market (production and demand) has given US factories a reason to want to produce Tofu. The price that they can sell Tofu at now will give them a better return, making more people want to get into the market. The supply curve demonstrates this. It has shifted outward/downward and to the right which means that more factories are producing Tofu. With a shift in both supply and demand, the equilibrium price changes. The price of production rises with demand and that price is passed on to the consumer. The price increase is a result of the shift in supply and demand. The volume of Tofu sold in the U.S. will increase given that Tofu is highly popular and healthy. It is now readily available and more people are willing to buy Tofu now than they were 25 years ago.

6. Over the past 25 years the supply curve has shifted to the right because of the improvement in technology, which in turn reduced the cost of producing the goods. The demand curve has also shifted to the right because there has been an increase in the preference by demanders for Tofu. The demand and supply models predict that the volume of tofu has risen from then and now. An increase in demand and supply will cause an increase in both the price and quantity of tofu. It would be rational for this event to occur, because if buyers are purchasing more of a good, then a company will gradually increase the price while the demand for the good is high. Thus the quantity of the good will also increase. For example, when there is an increase in demand for Jordan’s the price that manufacturers market the shoe will increase and the quantity of Jordan’s will rise because consumers demand it.