an economic issue that will be analyzing using the supply and demand model

Firstname Lastname

Instructor

Course

2 March 2016

Title

Please see the rubric for a complete explanation of how your paper will be graded. In the first paragraph you summarize the part of the article that you are analyzing in your paper. The summary will briefly and clearly emphasize the particular issue that you will be analyzing using the supply and demand model. For example, the summary should start with a sentence such as, “The author discusses rising US home prices and home sales over the past two quarters.” Under no circumstance should your summary exceed 100 words. For reference, this paragraph is exactly 99 words in length.

For the remainder of the paper you will provide an economic analysis of the article using the supply and demand model. There are two ways you can approach the analysis. The first approach is to explain a change that has occurred and the second approach is to predict a change that may occur. You should choose only one of these approaches. Whichever approach you take, you must add something new to the article. For example, if the article I’ve selected describes rising home prices and explains that rising home prices are the result of lower interest rates, I could not simply restate this as my own analysis… because it isn’t. The analysis must be a new idea from your own mind that extends the article. However, if I thought the rise in home prices was due to another variable such as rising income, then I could use this in my analysis.

As an example of explaining a change that has occurred, you can use the supply and demand analysis to explain a change that has already occurred in the price and quantity of a particular good or service as discussed in the article you selected. For example, the article may discuss rising home prices and home sales. If you choose this option, your task is to identify the cause of the change and explain how home prices (P*) and home sales (Q*) rose using the supply and demand model. For example, you might argue that rising home prices and home sales are the result of rising incomes due to a recovering economy. You would next explain how homes are a normal good for which demand increases as incomes rise. In the graph below you will illustrate the increase in demand and explain the resulting increase in equilibrium price from P1 to P2 and quantity of homes sold from Q1 to Q2.

Suppose that instead the article you chose describes rising incomes. In this case you may choose the second approach, to make a prediction about the future direction of home prices and home sales (or any other market). In this case you would explain, as before, that homes are a normal good and that an increase in incomes is expected to increase demand resulting in an increase in home prices from P1 to P2 and home sales from Q1 to Q2. If you find yourself struggling on deciding what to do with your article, it is often easiest to go with this approach.

Note that in either approach I will be looking for two key items in your analysis. The first item is an explanation of the cause of the shift in demand or supply. The second item is an explanation of the effect of the change in demand or supply on the equilibrium price and quantity in the market you are analyzing. Here you will refer the reader to your graph below and explain what the model predicts. For example, “As shown in Figure 1 below, an increase in demand is illustrated by a rightward shift in the demand curve from D1 to D2. This results in an increase in the equilibrium new home price from P1 to P2 and an increase in equilibrium home sales from Q1 to Q2. Therefore, the model offers a possible explanation for the observed increases in home prices and home sales over the past two quarters.”

As for the graph you will need to make changes to the template provided below to suit your analysis. To do this, right click on the figure, select Document Object, then click Open. This will bring up a new Word document that you can edit. Changes will automatically update in the template. If your analysis involves a change in supply simply duplicate the supply curve and label the new one S2, then delete D2. If you struggle with this please catch me after class or come to office hours. Microsoft products tend to make Macintosh products nauseous. If you have formatting issues with your computer, please use a campus computer to create your graph, save it as a picture file (e.g. .png), then copy the image into your document.

For the citation, you will have only one source to cite. Some examples are supplied to assist you.

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1

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2

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𝑄𝑢𝑎𝑛𝑡𝑖𝑡𝑦 𝑜𝑓 ℎ𝑜𝑚𝑒𝑠 𝑠𝑜𝑙𝑑

𝑀𝑎𝑟𝑘𝑒𝑡 𝑓𝑜𝑟 𝑁𝑒𝑤 𝐻𝑜𝑚𝑒𝑠

𝑃

1

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𝑃

2

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𝑄

1

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2

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Figure 1

Works Cited

Lastname, Firstname. “Title of the Newspaper Article.” Title of the Newspaper Date, edition: SectionPagenumber+.

“The Title of the Article.” Title of Magazine Date: page number. Name of the Library Database: Name of the Service. Name of the library with city, state abbreviation. Date of access <URL>.

Lastname, Firstname. "Title of the Article." Website Title. Publisher. Web.