Reference no: EM132857635
Supply and Demand
In these set of problems, you examine scenarios and determine if there is a change in the quantity supplied and quantity demanded.Alternatively, the scenario may describe a shift in supply or a shift in demand.Remember a change in the quantity supplied or the quantity demanded results in movement along the current supply and demand curves. Whereas a shift in supply or a shift in demand results in a shift of the whole curve to the left or right of the current curve.The tables below list questions to help you identify if there was a shift in supply or a shift in demand.
Shift in the supply curve:
1. Is there a change in the cost of production?
2. Is there an advancement in technology?
3. Is there a change in the price of other goods?
4. Is there a change in the number of suppliers?
5. Is there a change in taxes?
6. Is there a change in future price expectations?
7. Did a random event, such as a weather event, impact production?
Shift in the demand curve:
1. Is there a change in income?
2. Is there a change in the price of a related good or service?
3. Is there a change in preferences?
4. Is there a change in future price expectations?
5. Is there a change in population?
In each problem, you must explain the scenario's effect on the market.If the quantity supplied or the quantity demanded changes, state how (increase or decrease).If instead, the scenario meets one of the criteria above, indicating there is a shift.If one of the curves shifts, state why and the direction it shifts (left or right). You should then state the effect on price (increase or decrease).
Example problem:
The first lady declares war on sweets in America. You make doughnuts.
Answer:The first lady's opinion is valued and will cause a preference change.This preference change will shift the demand curve to the right.This decreases demand and decreases price.
1. You are a wheat farmer. Locusts attack your wheat.
2. Price of gasoline goes up. You own a gas station.
1. The price of corn goes up. You normally plant soybeans.
2. The price of peanut butter goes up. You sell jelly.
3. Your patent runs out on your popular and necessary drug.
4. Amazon has picked your small town to be their new worldwide headquarters.
5. The country is going into a recession. You sell jewelry.
6. The price of TVs just decreased by 20%.
7. Your product was declared one of "Oprah's Favorite Things."
8. You grow cotton and Eli Whitney just invented the cotton gin.
9. A hurricane is predicted to hit the rich coffee growing area of Colombia. You sell coffee.
10. Congress just passed a tax credit for energy efficient home improvements.You sell solar panels.
11. Soldiers come home from World War II, get married, and need housing for their families.You build houses.
Attachment:- Supply and Demand.rar