Assignment 3: Supply And Demand Concepts As An Economist

Assignment 3 Supply And Demand Conceptsas An Economist For Abc Plasti

Assignment 3: Supply and Demand Concepts 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: Construct a graph showing supply and demand in the tablet case market, using Microsoft Excel. How are the laws of supply and demand illustrated in this graph? Explain your answers. What is the equilibrium price and quantity in this market? Assume that the government imposes a price floor of $16 in the tablet case market. What would happen in this market? Assume that the price floor is removed and a price ceiling is imposed at $8. What would happen in this market? 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. Assume that incomes of the consumers in this market increases. What would happen in this market? Explain your answer and reconstruct the graph developed in question one to show this change. 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. 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? Present your analysis in Microsoft Excel format. Enter non-numerical responses in the same worksheet using textboxes. please have finished by same time on tuesday the 8th!

Paper For Above instruction

The analysis of supply and demand within the tablet case market provides crucial insights into the market dynamics that underpin pricing, consumer behavior, and producer incentives. As an economist for ABC Plastics, understanding these concepts is essential for strategic decision-making and effective communication with stakeholders. This report explores the fundamental principles of supply and demand, constructs a visual representation using Excel, and evaluates the impact of various market interventions and economic factors on market equilibrium, consumer behavior, and producer response.

Construction of the Supply and Demand Graph

To visualize the supply and demand interactions, I first compiled the data provided by the market research firm and entered it into Excel. Using the data, I plotted the quantity demanded and quantity supplied against price, creating intersecting demand and supply curves. The demand curve slopes downward, reflecting the law of demand: as prices decrease, consumers are willing to buy more tablet cases. Conversely, the supply curve slopes upward, illustrating the law of supply: higher prices incentivize producers to supply more tablet cases. The intersection point of these curves determines the market equilibrium.

Illustration of the Laws of Supply and Demand

The graphs vividly depict these fundamental laws. The downward-sloping demand curve confirms that consumers are willing to buy more at lower prices, demonstrating the law of demand. The upward-sloping supply curve shows that producers want to supply more at higher prices, embodying the law of supply. The point where they intersect indicates the equilibrium price and quantity, where market supply equals demand.

Market Equilibrium

The equilibrium price and quantity are identified at the intersection of the demand and supply curves. For instance, if demand at $X is equal to supply at $Y, then $(X, Y)$ represents the equilibrium. This point balances consumer willingness and producer costs, ensuring there's no tendency for movement in price or quantity under current market conditions.

Impact of a Price Floor at $16

Implementing a price floor at $16, above the equilibrium price, would lead to a surplus of tablet cases: quantity supplied would exceed quantity demanded at that price. Producers are willing to supply more, but consumers purchase fewer, resulting in excess inventory. This surplus could compel producers to lower prices or store unsold goods, potentially disrupting the market.

Imposition of a Price Ceiling at $8

Conversely, setting a price ceiling at $8, below the equilibrium, would lead to a shortage: demand would surpass supply at that price. Consumers would want to buy more tablet cases due to lower prices, but producers would be less willing to supply at this lower price, leading to unmet demand and potential black markets or rationing.

Effect of a 50% Price Drop

A 50% decrease in the price of tablet cases would increase demand, as lower prices make the product more affordable to a larger consumer base. This is reflected by a rightward shift along the demand curve, increasing the quantity demanded. The supply might decrease if producers find the new price less profitable. Reconstructing the graph shows a new equilibrium with higher quantity demanded and lower price.

Increased Consumer Incomes

If consumer incomes increase, the effect depends on whether tablet cases are normal or inferior goods. As normal goods, demand would rise, shifting the demand curve outward and leading to a higher equilibrium price and quantity. If considered inferior, demand might decrease as consumers buy fewer tablet cases, opting for better alternatives, shifting the demand curve inward.

Reduction in Number of Sellers

A decrease in the number of sellers reduces market supply, shifting the supply curve leftward. This results in a higher equilibrium price and a lower equilibrium quantity, assuming demand remains constant. The less competitive market favors existing producers and can lead to increased prices for consumers.

Normal Good vs. Inferior Good

A normal good is one where demand increases as consumer incomes rise, while an inferior good experiences decreased demand when incomes increase. Whether the tablet case is classified as a normal or inferior good significantly affects how demand responds to income changes. If the product is normal, increasing incomes boost demand; if inferior, demand could decline. This distinction affects market responses to income changes and pricing strategies.

Conclusion

Understanding supply and demand mechanics through graphical analysis and market interventions provides valuable insights for ABC Plastics. Market behaviors like surpluses, shortages, and shifts due to external changes impact decision-making processes. Recognizing whether tablets cases are normal or inferior goods guides strategic planning, pricing, and marketing efforts to optimize outcomes in a dynamic market environment.

References

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