Reference no: EM133063104

• Apply basics of supply and demand analysis to identify how consumers and producers make market participation decisions.
• Examine how supply/demand for goods impacts the supply/demand for resources to produce those goods.

Instructions

You have been hired as a consultant to summarize local market conditions for a particular model of energy-efficient automobile for a US automaker. The automaker is concerned that US incomes are falling and inflationary pressures may increase in the future. Increased demand for one of the unique resources needed to produce this model are liking to rise in the future as well. Using the demand and supply schedules provided below, develop a two-page report that identifies current equilibrium price and quantity in this market. In addition to identifying the current equilibrium, your client has asked you to include the following discussions in your report:

• Describe how consumers and producers make decisions to participate in the market.
• Expected change to equilibrium price and quantity if the price of a substitute good (an alternative make of auto) decreases vs the expected change if the price of a complement decreases (lithium batteries).
• If the increased input prices do occur as predicted, explain how the company would react and what action they would take.
• Finally, evaluate the change to equilibrium as income is falling and inflation is expected in the future.
• Make sure to include how the firm will be impacted in each scenario.