Supply and Demand Research

 

Week 1 Research Assignment

 Applying Supply and Demand:  Real World Examples

For this assignment you will find a news article (not a blog, not Wikipedia, not an opinion article, a news article) that describes a change in supply, demand or both in a real world market.  The learning objective is to understand how supply and demand impacts markets and prices.Begin by downloading and studying:

Supply and Demand Graphs.pptx

SupplyAndDemandGraphs2
researchProjectRubric

Assignment History

• Find a news article on the Internet that describes a shift in the supply curve or in the demand curve. The article must be recent (within the last six months), and MUST NOT be from an encyclopedia or reference website that discusses demand and supply. DO NOT use blogs.  Use well established business web sites or industry specific web sites.
• The best articles are about changes in the price and/or sales of a particular product. You then have the opportunity to demonstrate your understanding of supply and demand shifts as you explain the changes in price and quantity experienced by the product you choose.
• DO NOT use articles whose titles directly imply the graph.  For example: “supply decrease”, “demand increase”, etc.  You should use only articles that discuss changes in price and/or sales but DO NOT use articles that directly refer to supply and/or demand changes.  The video below explains how to look for an appropriate article.
• RECOMMENDATION: READ THE SAMPLE PROJECT: Under the Getting Started link.
• Summarize the article. (Do not quote the article, but explain it as if you were telling someone about it. If you do use direct quotes or paraphrases, remember that citations and references are required.)
• Explain which graph in our collection – A, B, C, or D – illustrates the shift that you identify by describing the change in price and the change in equilibrium quantity (remember the difference between a change in quantity and a change in the position of the curve – these are described in the documents linked above).
• Some articles may describe a situation where both curves shift.  This is not common but it is possible.
• Do use paragraphs in your post, and remain focused on what is in the article.
• Provide a full URL link to the article along with an APA-formatted reference to the article at the bottom of your submission.
• Important: This is a Microeconomic course. Do not choose an article discussing Macroeconomic issues: Inflation, unemployment, trade deficit, government budget deficit, etc.

Video demonstrating how to look for an article:
NOTE: This research assignment is 5% of your course grade. In Week 3 there is similar assignment that is 15% of your course grade. The difference is so that you can learn how to properly complete the research assignment in Week 1. Thus, in Week 3 the expectations for your work will be higher than in Week 1. Be sure to carefully review any instructor feedback on your Week 1 research assignment and to apply that to your Week 3 research assignment work.
RUBRIC FOR RESEARCH ASSIGNMENT – MICROECONOMICS Levels of Achievement  CriteriaPoor workPartial workGood workArticle quality(10 points)Article selected is not appropriate (no current news, self-implied graph in title, encyclopedia)(0 points)Article is partially acceptable: old, too broad (macro), partial self-implied graph in title(5 points)Proper article selected (current news, title refers to changes in price or sales) (10 points)Specific graph reference(10 points)No specific graph reference (A, B, C, or D) (0 points)Graph is implied but it’s not named or identified(5 points)A specific graph (A, B, C or D) is selected (10 points)Appropriate graph reference(40 points)Graph is selected, but it’s not appropriate or consistent with the article being used(0 points)Graph selected is not appropriate but arguments used are (20 points)Student selects an appropriate graph  (40 points)Graph justification(40 points)No justification of graph (s) (0 points)Weak arguments justifying graph (s) (20 points)Student justifies graph(s) properly (40 points)
If you have any questions or concerns, email me.To receive full credit, your submission must be at least 250 words long.Now click on the “Week 1 Research Assignment” title at the top of the page and submit your assignment as a Word Document. 

KEISER

C

OLLEGE

Writing Skills Scoring Rubric

Criteria

5

Excellent

4
Good

3
Acceptable

2
Fair

1
Poor

Score
1-5

ORGANIZATION

Writing is clearly
organized around a
central theme. Each
paragraph is clear and
relates to the others in a
well-planned framework.

Writing is
organized. The
paper contains a
central theme and
planned
paragraphs.

Writing
demonstrates
some grasp of
organization, with
a discernible
theme and
supporting details

Writing is unfocused
and there is some
evidence of details.

Writing is rambling and
unfocused, with main
theme and supporting
details presented in a
disorganized, unrelated
way.

CONTENT

Topic is well developed,
effectively supported and
appropriate for the
assignment. Effective
thinking is expressed
clearly and creatively.

Topic is developed
and there is
evidence of
creative thinking.

Topic is evident
with some
supporting
details; generally
meets
requirements of
assignment.

Topic is marginally
developed and
thinking is minimal.
There is evidence of
a minimal
understanding.

Topic is poorly
developed, with
supporting details that
are absent or vague.
Trite ideas and/or
unclear wording reflect
lack of understanding of
topic and audience.

GRAMMAR

Sentence structures are
complex and contain no
errors in mechanics
defined but not limited to
run-on sentences,
fragments or comma
splices, etc. Paper is
free of grammatical
problems defined but not
limited to punctuation,
capitalization, noun-verb
agreement, use of
pronouns, adverbs, and
adjectives, etc.

Good sentence
structure is
noticeable. There
are sporadic errors
sentence
mechanics.
Sporadic errors
are also in the
grammar of the
paper.

There is some
sentence variety.
Some errors are
evident in
sentence
mechanics and
the grammar of
the paper.

Very little sentence
structure is
noticeable.
Sentences are
simple. Frequent
errors in sentence
mechanics are also
noticeable. The
paper has frequent
errors in its
grammatical
structure.

Writing lacks sentence
variety; sentences are
very simple and use an
oral pattern of language.
The paper also
demonstrates an
excessive number of
errors in sentence
mechanics and in
grammar.

WORD USAGE

AND SPELLING

The paper contains an
excellent use of word
choice and it is free from
spelling mistakes. The
paper also uses proper
language forms and the
meanings of its
sentences are very clear.

The paper
contains a good
use of word
choice, but has
sporadic spelling
mistakes. There
are also sporadic
errors in the uses
of proper
language.
However, the
meanings of the
sentences are
clear.

The paper
contains an
adequate usage
of wording. There
are some spelling
mistakes.
Sentence
meanings are
somewhat clear.

The paper contains
some use of word
choice. The paper
uses slang or other
improper uses of
language. Sentence
meanings are
unclear. The paper
has frequent spelling
mistakes.

The paper demonstrates
deficiencies in word
usage and has an
excessive number of
spelling mistakes.
Errors in grammar,
wording, sentence
structure, and language
distract the meanings of
the sentences. There is
an excessive misuse of
language and an
excessive use of slang.

Scale:
18-20-A
16-17-B
12-15-C
8-11-D
0-7-F

OVERALL
GRADE:

TOTAL:

C

To be used with the supply and demand guide

Supply and Demand Graphs

1

Review of x and

Y axis

A graph consists of two axes called the x (horizontal/quantity) and y (vertical/price) axes.

The point where the two axes intersect is called the origin. The origin is also identified as the point (0, 0).

X axis

Moving right from the origin of (0,0), the numbers ascend. Moving left from the origin, the numbers descend.

Y axis

Moving up from the origin of (0,0), the numbers ascend. Moving down from the origin, the numbers descend.

In this course, we will mainly be using the upper right quadrant of the graphic area.

In economics it is the norm to show the independent variable on the y-axis and the dependent variable on the x-axis.

2

The Demand Curve
Demand Curve – A downward sloping curve that measures the relationship between the price of a good and the quantity demanded by consumers.
Demand – The amount that consumers are willing and able to purchase at various prices.
Change in Demand – A shift in the position of the demand curve that occurs in response to a change in one or more of the determinants of demand (non-price induced change).
Law of Demand – All other factors equal, the higher the price of the good or service, the lower the quantity demanded (price induced change). And the lower the price, the higher the quantity demanded. Price and Quantity Demanded vary inversely.
Change in Quantity Demanded – A change in the quantity consumers are willing and able to purchase. It is a response to a change in the market price.

3

Why does the demand curve shift?
The Determinants of demand
Shifts in the curve (change in demand) result from changes in one or more of the non-price determinants of demand:
Number of Consumers in the market (Size of Market)
Consumer Tastes and Preferences
Consumer Income
Prices of Related Goods (Substitute Goods and Complimentary Goods)
Expectations about the Future

4

The Demand Curve: Increases In Demand
Increase in Demand
Curve shifts to the right as a result of an increase in demand by the consumers (D1 to D2). This is caused by a change in one or more of the determinants of demand.
This causes Price to increase (P1 to P2). This shows a willingness to pay a higher price for all possible quantities of the good.
Suppliers respond to the higher price by increasing Quantity Supplied (q1 to q2) .
This process results in a new Equilibrium at e2 with Equilibrium Price P2 and Equilibrium Quantity q2.

5

The Demand Curve: Decreases In Demand
Decrease in Demand
Demand curve shifts to the left as a result of a decrease in demand by the consumers (D1 to D2). This is caused by a change in one or more of the determinants of demand.
This causes Price to decrease (P1 to P2). This shows a decreased willingness to pay for all possible quantities of the good.
Suppliers respond to the lower price by decreasing Quantity Supplied (q1 to q2) .
This results in a new Equilibrium at e2 with Equilibrium Price P2 and Equilibrium Quantity q2.

6

Supply Curve
Supply Curve – A curve that normally slopes upward (to the right) representing the quantity of a product producers are willing and able to bring to market at various prices.
Supply – The amount that producers are willing and able to bring to market at various prices.
Change in Supply – A shift in the position of the supply curve in response to a change in one or more of the determinants of supply (non-price induced change).
Law of Supply – All other factors equal, the higher the price of a good or service, the greater the quantity supplied to the market (price induced change). And the lower the price, the lower the quantity supplied. Price and Quantity Supplied vary directly.
Change in Quantity Supplied – A change in the quantity producers are willing and able to bring to market. It is a response to a change in the market price.

7

Why does the supply curve shift?
The determinants of supply
Shifts in the curve can be attributed to changes in one or more of the non-price determinants of supply:
Costs of Production:
Input prices (prices of the Factors of Production – resources)
Taxes
Regulatory compliance costs
Legal Expenses
Transactions Costs
Number of Firms in the Industry (productive capacity)
Relative Prices of Alternative Outputs
Technology (sometimes this is grouped with costs of production as technology determines the methods of production available to the firm)
Expectations about the Future

8

The Supply Curve: Increases In Supply
Increase in Supply
Supply curve shifts to the right as a result of increased supply in the market. (S1 to S2). This is caused by a change in one or more of the determinants of supply.
This causes Equilibrium Price to decrease (P1 to P2).
In response to the lower price, Quantity Demanded increases (q1 to q2).
This produces a new Equilibrium e2 at Equilibrium Price P2 and Equilibrium Quantity q2.

9

The Supply Curve: Decreases In Supply
Decrease in Supply
Supply curve shifts to the left as a result of decreased supply in the market. (S1 to S2). This is caused by a change in one or more of the determinants of supply.
This causes Equilibrium Price to increase (P1 to P2).
In response to the higher price, Quantity Demanded decreases (q1 to q2).
This produces a new Equilibrium at e2 and Equilibrium Price P2 and Equilibrium Quantity q2.

10

Steps to solve supply and demand problems
Use the following steps – in the order provided – to solve supply and demand problems.
Remember that changes occur for a reason and it is important to follow that chain of causation in all economic analysis.
The Steps:
Identify the determinant change indicated in the problem;
Shift the curve whose determinant has changed;
Shift it in the direction indicated by the determinant change;
Change the market price in line with the curve shift;
Move along the other curve in response to the price change (change in quantity demanded or quantity supplied as appropriate);
Find the new market equilibrium price and quantity.

11

An example:
The Fresh Fruit Market
Start with the Fresh Fruit market in equilibrium as shown in the graph.
At equilibrium point e, the amount that consumers wish to buy at price P is exactly equal to the amount that producers wish to sell at price P.
The quantity demanded is equal to the quantity supplied at the market price of P (quantity demanded = quantity supplied).
The market clears – there is no shortage and no surplus.
Then consumers decide to eat healthier foods, including more fresh fruit.
The determinant that changes is Consumer Tastes and Preferences.

12

An example:
The Fresh Fruit Market – Step 2
Since consumers have now decided to consumer (buy) more fresh fruit, the demand curve shifts to the right.
This shift graphically shows that consumers want more fresh fruit.
AND that they are willing and able to pay more for all quantities of fresh fruit.
This change is shown in the graph as the shift of the demand curve from D1 to D2.

13

An example:
The Fresh Fruit Market – Step 3
In response to the higher demand, the market price increases (P1 to P2).
This, again, shows that consumers are willing and able to pay more of the larger quantities of fresh fruit that they now want to buy.
The new price is shown as P2 in the graph of the Fresh Fruit Market.

14

An example:
The Fresh Fruit Market – Step 4
In response to the new higher price, producers will move along their supply curve from P1 at e1 to P2 at e2 and bring a higher quantity of fresh fruit to the market.
This is an increase in Quantity Supplied.
This is a reaction to the higher price in the market.
The higher price is necessary to induce the greater quantity supply as expanding output involves increased costs of production as more resources must be hired.
This process results in the new equilibrium point, e2, at the new equilibrium price of P2 and new equilibrium quantity of q2.

15

Conclusion
Follow this process as outlined in the Supply and Demand Guide and as discussed and illustrated in the previous slides.
These steps work for any determinant change for either supply or demand.
Should a problem involve a change in a determinant of demand and a determinant of supply, these steps still work and will lead you to the correct solution.
In such a case, work through each determinant change individually, then combine the two changes to produce the total change in the market and the new market equilibrium.

D

Price

Quantity
0

S

P

q

e

P2

Supply and Demand Guide

To solve the homework problems do the following:

1. Identify the determinant change

2. Shift the appropriate curve in the correct direction

3. Change price appropriately

4. Move along the other curve (the one that did not shift) in response to the price change.

The following information will tell you the determinants and how the change, as well as definitions of the key terms.

Demand

Demand: The amount that consumers are willing and able to purchase at various prices.

Law of Demand: Price and Quantity Demanded vary inversely.

Quantity Demanded: The amount that consumers are willing and able to buy at a particular price.

Change in Quantity Demanded: Changes in price change the quantity demanded. This is a Movement Along a Demand Curve in Response to a Price Change.

Change in Demand: This is a shift in the position of the demand curve, either upward or downward. If the curve shifts upward, consumers are saying they will pay more for all quantities of the good or service. If it shifts downward, consumers are saying they will pay less for all quantities of the good or service.

Determinants of Demand: The Demand Curve will shift only when one (or more) of the Determinants of Demand changes. These determinants are:

1. Size of Market: the number of consumers in the market for the good or service. If this factor increases, the curve shifts upward (increase in demand). If this decreases, the curve shifts downward (decrease in demand).

2. Consumer Tastes and Preferences: if these shift in favor of a product, the demand curve shifts upward (demand increases); if these shift against a product, the demand curve shifts downward (demand decreases).

3. Consumer Income: as the income of consumers increase, consumers purchase more of all normal goods (assume all the goods in the homework are normal goods), this shifts the demand curve upward (demand increases); if income decreases, then consumers buy less of all normal goods, this shifts the demand curve downward (demand decreases).

4. Prices of Related Goods:

a. Complimentary Goods: These are goods that are used to together like peanut butter and jelly. If the price of peanut butter goes up, the Quantity Demanded of peanut butter will decrease (a movement along a demand curve in response to a price change). However, the Demand for jelly will decline (decrease in demand) as fewer people buy it to go with the peanut butter, since they are buying less peanut butter.

b. Substitute Goods: These are goods that are used in place of each other. If the price of Coke Cola goes up, the Quantity Demanded of Coke does down (a movement along the demand curve). But the Demand for Pepsi – the substitute good – goes up as people substitute the lower priced Pepsi for the higher priced Coke (the Pepsi demand curve shifts upward).

5. Expectations about the Future: If people have a positive view of the future they will consumer more and save less. This shifts the demand curve for all normal goods upward. If people have a negative view of the future, they will consume less and save more, this shifts the demand curve for all normal goods downward.

Supply

Supply: The amount that producers are willing and able to bring to market at various prices.

Law of Supply: Price and Quantity Supplied vary directly.

Quantity Supplied: The amount that producers are willing and able to bring to market at a particular price.

Change in Quantity Supply: Changes in price change the quantity supplied. This is a Movement Along a Supply Curve in Response to a Price Change.

Change in Supply: This is a shift in the position of the supply curve, either upward (inward) or downward (outward). If the curve shifts upward, producers are saying they will bring less to market at all prices. If it shifts downward, producers are saying they will bring more to market at all prices.

Determinants of Supply: The Supply Curve will shift only when one (or more) of the Determinants of Supply changes. These determinants are:

1. Number of Firms in the Industry: If the number of firms in an industry increases, the more the industry can produce – this shifts the supply curve downward (outward) – this is an increase in supply. If the number of firms in an industry decreases, the industry can produce less output – this shifts the supply curve upward (inward) – this is a reduction in supply.

2. Relative Price of Alternative Outputs: If a firm can produce Product A or Product B with the same resources (inputs), it will produce the product with the higher price. If the price of Product A increases relative to Product B, then the firm will produce more of A and less of B. This causes the Supply Curve for A to shift outward (increase in supply) and the Supply Curve for B to shift upward (decrease in supply).

3. Costs of Production*: The costs of production is the primary determinant of supply. If the costs of production increase, then supply decreases – the Supply Curve shifts inward (a decrease in supply). If the costs of production decrease, then supply increases – the Supply Curve shifts outward (an increase in supply).

4. Expectations About the Future: If firms have a positive view of the future, they will increase production which is an increase in supply – the curve shifts outward. If firms have a negative view about the future, they will decrease production and the supply curve will shift upward – a decrease in supply.

* The Costs of Production include:

· Prices of inputs – the Factors of Production

· Business Taxes

· Complying with regulations

· Less any Subsidies the firm may receive

In equilibrium, the quantity supplied equals the quantity demanded.

Graph A

When one or more of the determinants of demand (see above) change such that the demand for a good increases, that shows that consumers are willing to pay more for all possible quantities of the good. The upward shift in the demand curve causes an increase in price. Suppliers respond to the higher market price by bringing a greater quantity supplied to market – recall the Law of Supply.

SHAPE

Graph B

When one or more of the determinants of demand (see above) change such that the demand for that good decreases. The demand curve reflects this by shifting downward, showing the consumers are willing to pay less for all possible quantities of the good. This causes a decrease in price. Suppliers respond to the price change by bringing a lesser quantity supplied to market – recall the Law of Supply.

SHAPE

Graph C

When one or more of the determinants of supply (see above) change such that the supply for that good increases, the supply curve shifts outward showing that suppliers can bring more product to market at lower prices for all possible quantities. This causes a decrease in price. Demanders will respond to the price change with a greater quantity demanded – recall the Law of Demand.

SHAPE

Graph

D

When one or more of the determinants of supply (see above) change such that the supply for that good decreases, the supply curve shifts inward showing the suppliers can bring fewer products to market at higher prices for all possible quantities. This causes an increase in price, and demanders are willing to buy a lesser quantity demanded – recall the Law of Demand.

SHAPE

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