1. Graph showing effect on the Fizzy Drinks market when advertising increases. $ Qty Orginally the market equilibrium is at 50c (price) and 10 (quantity) Advertising convinces the market to buy more So now even though there is no change in prices (still 50c) – demand has increased to 15 (a) Possibly shortage (of 5 ) exists if the market cannot supply that extra quantity. – in this case price will rise ( aprox 60) and as it does ‘demand will fall & supply will rise ( aprox 13)’ to Equilbrium point B B Or (b) Suppliers will react to the changed market and be prepared to supply more at the same price (S1) to give Equilibrium point C C

2. Graph showing effect on the Jewellery market when recessions hits $ Qty Orginally the market equilibrium is at 20 (price) and 100 (quantity) Recession means people buy less luxuries So now even though there is no change in prices (still 20) – demand has decreased to 70 (a) Possibly surplus (of 30 ) exists if no suppliers immediatly quit the market in this case price will fall ( aprox 16) and as it does demand will rise & supply will fall ( aprox 85) to Equilbrium point B B Or (b) Suppliers will react immedialty & stop excess production – leaving less supply but unchanged price - to give Equilibrium point C C

3. Show, using a fully labeled graph, what would happen to demand for bottled water, following an announcement on TV that a hurricane was about to hit