Economics

Economics Analysis

Economics Analysis

Question . 1

Graph the demand and supply curves for the orange market. Title your diagram, label the axes and label the demand and supply curves

Demand and Supply for Orange Market

Indicate the Market Equilibrium point on your diagram and clearly show the area of consumer surplus and producer surplus.

Explain what it means and what would happen in the market if the price was set at $6 per case and demonstrate this on your diagram.

It means that the price is inelastic at any quantity demanded and any quantity supplied. There will not be any effect in the price and it will remain constant at $6. No matter if the oranges are being bought in bulk still the price would remain high at $6. The price is not determined by the demand and supply.

Explain what it means and what would happen in the market if the price was set at $3 per case and demonstrate this on your diagram.

It means that the price is inelastic at any quantity demanded and any quantity supplied. There will not be any effect in the price and it will remain constant at $6. No matter if the oranges are being bought in less quantity still the price would remain less at $3. The price is not determined by the demand and supply.

Suppose demand increases by 40 cases per day at each price level. Draw both the old and new demand supply curves on a new diagram to demonstrate the effect. Explain the factors that could make this happen

There may be various causes for the shift in demand curve from left to right. The potential causes are mentioned as follows;

Change in the nukmber of consumers

Changes in the preferences and taste

Changes in the price expectation

Changes in the consumer income

Changes in the prices of substitute and complementary products

Answer # 1 (c)

The market for small cars when the price of petrol increases

When the price of petrol increases it will impact demand of small cars as it is a compliment of cars. As petrol prices increases small car demand will decline. Petrol prices increase will impact largely if no substitutes available. Yet consumer has choice to shift on to gas consumption.

The market for overseas travel when income increases

As, income increases consumption by overseas travel will increases. Hence income has direct relation in increasing demand for overseas travel.

The market for computers as production costs rise

As, production costs increases it will make supply of computers less due to huge costs. Increasing production cost has direct link in decreasing supply of computers.

The market for tea when the price of sugar rises

Sugar is considered to compliment product for tea and it suggests that as price of sugar rises demand for tea will decrease as cost of tea will increase.

The market for new models of flat screen TVs if there is a large increase in the number of TV commercials promoting new models of televisions

Promotion for new television increases; it will have direct impact on ...