Microeconomics: supply and demand

BU224M1

In the Reading, Learning Activities, and videos related to the supply and demand analysis course outcome, you have learned how to calculate marginal opportunity costs in a simplified production possibility frontier curve to determine who has the comparative advantage as it relates to trade. You also learned how to calculate the equilibrium price and quantity in a perfectly competitive market and looked at how that equilibrium price and quantity changes when additional demand influences the market, as well as seeing how the original group of consumers are affected by these new consumers entering the market.

Directions:

In this Assessment, you will apply your understanding of comparative advantage as a foundation for trade, along with your understanding of the crucial concept of changes in supply and demand equilibrium. You will also provide a rational approach on how cultural differences and the downfalls of stereotyping people from foreign cultures and misunderstanding their cultural attitudes affect international trade. This Assessment requires a combination of short paragraph answers, computations, and completion of a 450–500-word expository research paper using this template.

Questions

1. Suppose that the supply schedule of Brazilian coffee beans is as follows:

Table 1

Price of Brazilian coffee beans (per pound)	S Quantity of Brazilian coffee beans supplied (pounds)
$4.00	6,000
$3.50	5,000
$3.00	4,000
$2.50	3,000
$2.00	2,000

Suppose that Brazilian coffee beans can be sold only in Brazil. The domestic Brazilian demand schedule for Brazilian coffee beans is as follows:

Table 2

Price of Brazilian coffee beans (per pound)	DB Brazilian quantity of Brazilian coffee beans demanded (pounds)
$4.00	1,000
$3.50	2,500
$3.00	4,000
$2.50	5,000
$2.00	7,000

a. From the supply and demand schedules above, what are the equilibrium price and quantity of Brazilian coffee beans?

Now suppose that Brazilian coffee beans can also be sold in Canada. The Canadian demand schedule for Brazilian coffee beans is shown in Table 3.

Table 3

Price of Brazilian coffee beans (per pound)	DC Canadian quantity of Brazilian coffee beans demanded (pounds)
$4.00	1,000
$3.50	2,500
$3.00	3,000
$2.50	5,000
$2.00	5,500

b. Complete column DC+B total combined Canadian and Brazilian coffee beans demanded of Table 4, by inserting the correct values, computed from information contained in Tables 2 and 3, at each price.

Table 4

Price of Brazilian coffee beans	S Quantity of Brazilian coffee beans supplied	DB Brazilian quantity of Brazilian coffee beans demanded	DC+DB Total combined Canadian and Brazilian coffee beans demanded
(per pound)	(pounds)	(pounds)	(pounds)
$4.00	6,000	1,000
$3.50	5,000	2,500
$3.00	4,000	4,000
$2.50	3,000	5,000
$2.00	2,000	7,000

Below is the new supply and demand graph (Graph 2.b.) that illustrates the equilibrium price and quantity of Brazilian coffee beans.

c. From the completed Table 4, what will be the new price at which Brazilian coffee growers will sell Brazilian coffee beans?

d. From the completed Table 4, what price will now be paid by Brazilian consumers?

e. From the completed Table 4, what will be the quantity consumed by Brazilian consumers?

2. In ancient days, a tribe of natives on the mythical continent of Atlantis were able to produce two commodities to eat. They could harvest fish from the sea and they could grow a form of wild oats. Table 5 and Graph 1.a. both show the maximum annual output combinations of fish and wild oats that could be produced by the natives of Atlantis.

Table 5

Maximum annual output options	Kilograms of fish	Bushels of wild oats
1	7,000	0
2	6,000	300
3	5,000	500
4	4,000	625
5	3,000	710
6	2,000	775
7	1,000	825
8	0	850

Graph 1.a.

a. Could the Atlantis tribe have produced 800 bushels of wild oats and 5,000 kilograms of fish at the same time? Explain your answer. Where would this point lie relative to the production possibility frontier?

b. Using Table 5, what would have been the marginal opportunity cost of increasing the annual output of wild oats by 200 bushels, from 300 bushels up to 500 bushels?

c. Using Table 5, what would have been the marginal opportunity cost of increasing the annual output of wild oats by 200 bushels, from 625 bushels up to 825 bushels?

d. Why are the marginal opportunity costs for two similar batches of 200 bushels of wild oats not the same? Explain. What does this difference imply about the shape of the Atlantis tribe’s production possibility frontier curve?

===== Question 3. Requires writing a 450–500-word expository research paper =====

An effective understanding of economics forms the foundation of every manager’s, entrepreneur’s, bureaucrats, and leader’s ability to analyze business situations and to develop an appropriate response. The globalization of business is a fact of life for all business professionals. One of the most contentious issues in today’s global business world is the issue of closing local manufacturing facilities, laying off those American workers, and re-opening the same manufacturing facility in an Asian, or other third world country.

Look in your own closet at the clothes you have purchased. Pick any 10 items of clothing and look at the labels in those clothes. Where were they manufactured? How many of the 10 items were manufactured here in America? If that same exercise had been done 50 years ago, (approximately the 1970s), all the clothes you owned would have been manufactured in textile mills in the Southeastern United States (Georgia, Alabama, Mississippi, North Carolina, South Carolina, etc.). All those Southeastern textile mills are now closed, and people buy foreign made clothes. If you were able to go further back in time to 150 years ago (1870s), the clothes you owned would have been manufactured in textile mills in the Northeast United States (Maine, New Hampshire, Vermont, Massachusetts, etc.). Yet, by the early to mid-1950s, those Northeastern textile mills were closed and their workers were out of a job. The mills had all relocated to the Southeast during the years following the Civil War.

Many people say that we should ban the import of these foreign made clothes, so that more workers in American clothing textile mills could have jobs. Others say that we should continue to import clothing because imported clothing is relatively less expensive and more people can afford to buy more clothes at these low prices. Still others say that we should put an import tariff (an extra tax that would be paid when we buy these imported clothes), making the price of imported clothing comparable to the price of clothing made in the U.S., and, therefore, encouraging American consumers to buy American-made clothing.

Compose a 450–500-word expository research paper, in APA formatting and citation style, including a references page. Insert your expository research below in the space indicated. Your writing and research should clearly respond to the following questions:

a. How much does international trade affect you personally? Look at any 10 items around your home that you have purchased in the last year. Where were they made?  How many were made in America, compared to how many were foreign made? What things does America export to other countries? What things does America import from other countries? How does what you have learned about Comparative Advantage affect this trade?

b. Currently there is a lot of talk among politicians about imposing tariffs on foreign made products imported into the U.S. and retaliatory tariffs imposed by foreign countries on U.S. made goods. What is a tariff? Who ultimately pays the tariff? Who gets the proceeds from the tariffs? What is the money used for? Discuss the advantages and disadvantages to all involved parties (American workers, American consumers, foreign workers, and foreign consumers) of tariffs on imports to the U.S. and retaliatory tariffs imposed by foreign countries on U.S. made goods.

c. In considering the foreign trade issue, discuss how the background, education and cultures of the people in the U.S. and the cultures in each trading country affects their understanding of the importance of foreign trade. Discuss the importance of your ability to understand and accept multiple cultural differences in a global context. What recommendations would you suggest to increase American understanding and acceptance of foreign cultures?

Begin your essay below:

(Enter text here.)

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References:

(List your references here.)

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