As An Economist For ABC Plastics, Your Boss Has Asked You To

As An Economist For Abc Plastics Your Boss Has Asked You To Respond T

As an economist for ABC Plastics, your boss has asked you to respond to some questions she has regarding the company’s main product, tablet cases. A marketing research firm recently developed the following supply and demand schedules for tablet cases: Price/Case, Quantity Demanded, Quantity Supplied. You are to develop a report addressing the following questions and present your findings to the Board of Directors:

Questions:

1. Construct a graph showing supply and demand in the tablet case market, using Microsoft Excel.
2. How are the laws of supply and demand illustrated in this graph? Explain your answers.
3. What is the equilibrium price and quantity in this market?
4. Assume that the government imposes a price floor of $16 in the tablet case market. What would happen in this market?
5. Assume that the price floor is removed and a price ceiling is imposed at $8. What would happen in this market?
6. Now assume that the price of tablet cases drops by 50%. How would this change impact the demand for tablet cases? Explain your answer and reconstruct the graph developed in question one to show this change.
7. Assume that incomes of the consumers in this market increase. What would happen in this market? Explain your answer and reconstruct the graph developed in question one to show this change.
8. Assume that the number of sellers decreases in this market. What would happen in this market? Explain your answer and reconstruct the graph developed in question one to show this change.
9. Explain the difference between a normal good and an inferior good. Would your answers to question #7 change, depending on whether this good is a normal or inferior good? Why or why not?

Paper For Above instruction

The demand and supply dynamics of the tablet case market provide critical insights into how market forces operate and influence pricing, availability, and consumer behavior. This report offers a comprehensive analysis based on the supply and demand schedules, exploring the current market equilibrium, the effects of government interventions like price floors and ceilings, and the influence of changes in consumer income and seller numbers. Furthermore, it examines the nature of goods—normal versus inferior—and how this classification impacts market responses.

Constructing the Supply and Demand Graph

Using Microsoft Excel, the initial step involves plotting the demand and supply schedules. The demand curve typically slopes downward, indicating that as the price decreases, consumers are willing to buy more tablet cases, exemplifying the law of demand. Conversely, the supply curve slopes upward, demonstrating that higher prices incentivize producers to supply more tablet cases, aligning with the law of supply. By inputting the price, quantity demanded, and supplied data into Excel and creating a scatter plot with lines, these curves visually manifest the fundamental economic principles governing the market.

Illustration of Supply and Demand Laws

The inverse relationship between price and quantity demanded illustrates the law of demand, where lower prices increase consumer purchase willingness. Meanwhile, the direct relationship between price and quantity supplied demonstrates the law of supply, with higher prices motivating producers to supply more. The intersection point of these curves indicates the market equilibrium, where the quantity demanded equals the quantity supplied.

Market Equilibrium Price and Quantity

Within the supply and demand schedules, the equilibrium point indicates the price and quantity where market forces balance. For example, if at $12 per case, the quantity demanded equals the quantity supplied—say, 1000 units—that marks the equilibrium price and quantity. This point serves as market stabilization where neither surplus nor shortage exists.

Impact of a Price Floor at $16

Imposing a price floor at $16, above the equilibrium price, would result in a surplus of tablet cases as consumers would demand fewer units at this higher price, while producers would be willing to supply more. This imbalance creates excess supply, potentially leading to unsold inventory and market inefficiencies, unless the government intervenes to prevent prices from falling below that threshold.

Imposition of a Price Ceiling at $8

Removing the price floor and implementing a price ceiling at $8—below the equilibrium—would lead to increased demand, as consumers seek to purchase more at lower prices, but a decrease in supply, due to producers' reluctance to supply at such low prices. This scenario causes a shortage of tablet cases, potentially leading to black markets or rationing mechanisms.

Effect of a 50% Price Drop on Demand

When the price of tablet cases drops by 50%, the law of demand predicts an increase in quantity demanded, shifting along the demand curve. This movement results in a higher quantity purchased by consumers, possibly exceeding supply at the new lower price. The demand curve in the graph would reflect this increased willingness to buy at decreased prices, illustrating the typical demand response.

Impact of Increased Consumer Income

If consumer incomes increase, the effect on demand depends on whether the good is normal or inferior. For a normal good like tablet cases—if they are considered normal—the demand curve shifts rightward, indicating higher quantities demanded at each price point, as consumers now have more disposable income to spend on such items. This shift results in a new equilibrium at a higher price and quantity in the graph.

Effect of a Decrease in the Number of Sellers

A reduction in the number of sellers decreases the overall market supply, shifting the supply curve leftward. This change leads to a higher equilibrium price but lower quantity sold, as fewer producers are available to supply the product. The graph would reflect this leftward shift, showing the new equilibrium point with a higher price.

Normal vs. Inferior Goods

A normal good’s demand increases with higher income, whereas an inferior good’s demand decreases as income rises. Regarding question #7, if tablet cases are classified as normal goods, increased income would boost demand, shifting the curve rightward. Conversely, if they are inferior goods, higher income would reduce demand, shifting the curve leftward. This distinction is crucial for accurate market analysis, as it influences how demand responds to economic fluctuations.

Conclusion

The supply and demand analysis of the tablet case market under various scenarios demonstrates the delicate balance of market mechanisms. Government interventions such as price floors and ceilings can distort this equilibrium, leading to surpluses or shortages. Changes in income and the number of sellers significantly influence demand and supply, which underscores the importance of understanding the nature of goods—normal or inferior—in predicting market behavior. As markets evolve, continuous analysis remains essential for effective decision-making by firms like ABC Plastics.

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