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Demand supply and market Equilibrium

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There are four questions and all need to be answered in an APA format using your own words. Find an article or use an example from your own business experiences in which supply and/or demand changed. Do not choose the market for labor. The analysis for a labor market is different from a typical good or service. Include each of the following in your initial post. 1. Explain which curve shifted and which shifter was affected. (If you think both curves shift, for simplicity, just choose one of the curve shifts to analyze.) 2. Discuss how equilibrium prices and quantities changed. For your responses, help your classmates analyze their situation further or ask them questions about their scenario. [Hint: Demand shifters are listed on pages 105-111 of your text. Supply shifters are covered on pages 116-119. I also go over the shifters in the Livescribe notes and the supplemental powerpoints that are provided in the Course Materials section.]

Using the demand curve shifters (PYNTE), explain whether each of the following will increase or decrease demand for cell phones. Tell whether the demand curve shifts to the right or to the left.

a. A decrease in the incomes of consumers of cell phones.

b. An increase in the price of apps for cell phones.

c. An increase in the number of consumers in the market for cell phones.

Using the supply curve shifters (SPEND) explain whether each of the following will increase or decrease the supply of cell phones. Tell whether the supply curve shifts to the right or to the left.

a. The market price of the glass used in cell phone screens increases.

b. The number of firms that make cell phones increases.

c. Cell phone manufacturers expect the market price of cell phones to increase next month.

Read the following article regarding Cap and Trade policies.

http://online.wsj.com/article/SB10001424052702304620304575165843688369042.html?mod=WSJ_hpp_sections_news

a. What is a good or service market that might be affected by limiting pollution via the cap and trade policy as described in the article? Explain.

[For simplicity, do not choose “jobs” or employment. Choose a good or service that would have its supply or demand affected by the cap and trade policy.]

b. Which of the shifters that shift either supply or demand (SPEND or PYNTE) does a Cap and Trade policy affect in the market you chose in Part (a)? Which curve (supply or demand) would shift in response to the policy? Will it increase or decrease?

c. Draw a supply and demand graph. Start with an initial equilibrium as you see on Slide #25 in the Attend section. Shift the curve in the direction that you chose in the previous section. Find the new equilibrium. (You do not need to turn in your graph. It is for your own use.)

Did the equilibrium price increase or decrease? Did the equilibrium quantity increase or decrease?

Answer

In the early 2000s, before mobile technology had been fully established in the market, the supply in the market was quite low at very high prices. At the time, the major suppliers of phone gadgets across the world were Samsung and Nokia, these brands being among the most longstanding companies in the mobile phones industry. However, with mobile technology gaining more and more ground among consumers, supply in the market has increased in the market at an explosive rate.

When this scenario is drawn into a combined demand and supply curve, incorporating this change occurring in the market, we will note that the supply curve shifts to the right signifying an increase in the quantity of phones supplied in the market.

In the phone industry, the above shift of the supply curve to the right is possible due to various factors that affected the market. The most significant cause of the shift is the increase in the number of phone gadgets manufacturers across the world. Nokia and Samsung could still be among the leading companies but there is stiff competition from new companies especially from Asian countries such as China. In America and Europe, Apple is also investing in the market heavily which has increased the supply of phones in the market. Companies such as Tecno are others that have caused the increase of supply to greater numbers which cause the shift of the supply curve to the right.

According to our curve, the equilibrium point initially is indicated by point E on the graph, but since the supply of cellphones has increased, quantity supplied increases to the graph indicated by S1S1, this causes an excess of the product in the market resulting in a stiff competition which often sees the sellers reduce their prices. The decrease of prices by the companies results in high demand of the goods, this means the equilibrium price falls to OP1 as the equilibrium quantity rises to OQ1, this creates the new equilibrium point E1.

Question Two

The demand curve of a product can shift either to the right or left depending on various factors that affect the demand for a good. Depending on the specific factor in consideration, the supply curve will shift to one side, below are some cases:

  • The case of a decrease in the incomes of consumers has the effect of shifting the demand curve to the left signifying reduction in the quantity demanded of cellphones. A decrease in income means consumers have less and less income that they can allocate to buying cell phones which means the demand will reduce. Reduction in supply has the effect of causing an excess in the market which leads to a price reduction of the product.
  • The next case scenario of an increase in the price of apps for cell phones will mean the price of cellphones is likely to increase meaning the demand of the commodity in the market will reduce which is shown in the graph by a shift of the demand curve to the left. Price increase of apps means consumers have to spend more with no additional income, which is not economically viable to many, this means they reduce their demand for the product.
  • The increase in the number of consumers in the market for cellphones automatically means higher quantity demanded cellphones in the market. An increase in demand without any price changes will see the demand curve shift to the right of the initial demand curve. Additional consumers results in additional quantity demanded of cellphones in the market, supplementary characteristics of the consumers such as age and taste might be also considered by the manufacturers.
  • Question three

    The quantity supplied of a given product in the market is susceptible to changes in the market dynamics. These changes either cause a shift to the right or left of the supply curve. The following changes in the cell phones market will have the following changes:

  • In case the price of glass used in cell phone screens increases will result in high cost of production for the manufacturers of cell phones, this higher costs will be transferred to consumers in terms of pricing of cell phones or see a reduction in the quantity produced which means lower supplies signified by a shift to the left implying reduced supply.
  • The increase in the number of companies that make cell phones automatically means more supply in the market which is shown in a graph by a shift to the right which implies increased supply in the market.
  • The expectation of manufactures that market prices to increase next month will see a reduction in the supply in anticipation of the higher prices to earn more revenue. This reduced supply is shown by a shift to the left of the supply curve.
  • Question Four.

    The food market as predicted by the group of California small businesses will be affected by the cap and trade policy introduction, this will surely result in the increase of production of cost of foods due to the increase in energy costs.A change of price of the energy costs means the inputs cost rise which will result in the supply curve shifting to the left, meaning low quantity supplied to the market. This change is manifested in an increase in the equilibrium price accompanied by a reduction in the equilibrium quantity of the food products in the market.

    References

    Hirschey, M. (2009). Managerial economics. Mason, OH: South-Western Cengage Learning.

    Mankiw, N. G. (2009). Principles of economics. Mason, OH: South-Western Cengage Learning.

    Marshall, A. (2013). Principles of economics.

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