Demand and Supply

Economics 101

Supply and Demand Assignment                              Name: ______________________________________

Part I.  Worth a maximum of 60 points.

Use supply and demand graphs below to illustrate your answers. To answer the questions, identify which curve would be impacted and which way it would shift. Show on the graphs which way the curve(s) shift and where the equilibrium price and quantity would end up.  Summarize the result by stating whether equilibrium price (P*) would rise or fall and whether equilibrium quantity (Q*) would rise or fall as a result of this change.

a. French fries and hamburgers are complements. If hamburgers become more expensive, what would happen to the equilibrium price (P*) and quantity (Q*) of French fries?

Market for French fries

b. Suppose that beans are an inferior good. If bean consumers’ income falls, what would happen to the equilibrium price (P*)and quantity (Q*) of beans?

Market for Beans

c. Wood pulp is used to produce paper. If the price of pulp decreases, what would happen to the equilibrium price (P*) and quantity (Q*) of paper?

Paper Market

d. Consider two competing car industries: American and Japanese. If the prices of American cars goes down, what would happen to the equilibrium price (P*) and quantity (Q*) of Japanese cars?

Market for Japanese Cars

e. Consider the orange juice market. Suppose that the wages paid to orange grove workers rise, what would happen to the equilibrium price (P*) and quantity (Q*) of orange juice?

Orange Juice Market

f. In the banana market, what would happen to the equilibrium price (P*) and quantity (Q*)of bananas if bananasbecome more popular AND (at the same time) a new machine is invented that makes workers who pick bananas more productive?

Banana Market

Part II.  Worth a maximum of 40 points --- all work must be in your own words in order to receive any credit on this part of the assignment(see Step 2 for a description of the method that will be used to check for plagiarism).

Conduct some research to find a real world good or service that has experienced a change in price of more than five percent over the past 12 months.  The product could be one that you are familiar with from the news, as a consumer, or because you or someone you know are employed in the industry.  Analyze why the price of the product has changed over this time period by completing the following steps:

                Step 1: Create a three-column table showing how the price of the product has changed over the past year.  The first column should show the date, the second column should show the product’s price on that date, and the third column should show the percentage change in the price from one period to the next.  The following table gives an example of what your table should look like:

Product Name: Good XYZ

If you would like to show more than two different date/price combinations that is fine, just be sure that the percentage change from 12 months ago to the present is more than 5%.

                Step 2: Use your best economic analysis skills to determine why the price of the product has changed.  In your own words, write a one page summary of the factors that lead to the change in price. Using the concepts presented in Chapter 3 of your textbook,state whether the price change was a result of a change in demand, a change in supply, or both, being very careful that you are basing your judgments on economic theory.Post your one page summary on the class website on Blackboard using SafeAssign.  This is a software program that will analyze your writing and compare it to other sources to guard against plagiarism.  Click on the Supply and Demand button and follow the instructions posted for submitting your paper to SafeAssign by midnight on March 1^st.  After that date, you will not be able to submit your paper and will not be able to earn any credit for Part II of this assignment.

                Step 3: Cite the source(s) of your information at the end of your write-up (no specific format required.)

Turn in a hard copy of Part I and Part IIincluding the table (Step 1), the write-up (Step 2), and the source(s) (Step 3) no later than March 2nd, 2016 in class.