Assignment 3: Supply And Demand Concepts You Have Been Hired

Assignment 3 Supply And Demand Conceptsyou Have Been Hired By A New F

Assignment 3: Supply and Demand Concepts You have been hired by a new firm selling electronic dog feeders. Your client has asked you to gather some data on the supply and demand for the feeder, which is given below, and address several questions regarding the supply and demand for these feeders.

Questions:

Construct a graph showing supply and demand in the electronic dog feeder 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 $180 in the feeder market. What would happen in this market? Assume that the price floor is removed and a price ceiling is imposed at $90. What would happen in this market?

Now, assume that the price of feeders drops by 50%. How would this change impact the demand for feeders? 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?

Deliverables:

Develop your analysis in Microsoft Excel format. Enter non-numerical responses in the same worksheet using textboxes.

Paper For Above instruction

The electronic dog feeder market presents a practical application of core economic principles, notably the laws of supply and demand. By analyzing this market, we gain insight into how various factors influence prices, quantities, and consumer behavior, ultimately shaping market outcomes.

Constructing a supply and demand graph in Microsoft Excel involves plotting the quantity demanded and supplied at different prices. The law of demand stipulates that as prices decrease, consumers tend to purchase more, leading to a downward-sloping demand curve. Conversely, the law of supply indicates that higher prices incentivize producers to supply more, resulting in an upward-sloping supply curve. These fundamental behaviors are visually represented in the graph, illustrating the inverse relationship between price and quantity demanded, and the direct relationship between price and quantity supplied.

The equilibrium price and quantity occur where the demand and supply curves intersect, signifying a balance in the market. Based on available data, the equilibrium point is determined at the price where the quantity demanded equals the quantity supplied, ensuring market clearing without surplus or shortage.

If the government sets a price floor at $180, it establishes a minimum price above the equilibrium. Since some sellers may want to supply more at that price while demand diminishes, a surplus develops, leading to excess inventory. Such a price floor can cause market inefficiencies, including wasted resources and potential government intervention to absorb surplus goods. Conversely, setting a price ceiling at $90 below the equilibrium price results in a shortage, as demand exceeds supply at that lower price. Consumers desire more feeders at this rate than producers are willing to supply, impairing market efficiency.

When the price of feeders drops by 50%, elasticity plays a significant role. Typically, demand increases as prices fall, especially if the product is elastic. Consumers respond to lower prices by purchasing more feeders, shifting the demand curve outward, which in turn raises the equilibrium quantity. Reconstructing the graph demonstrates this shift, with the demand curve moving rightward, and the new equilibrium settled at a lower price but higher quantity.

Increases in consumer incomes influence demand based on whether the good is normal or inferior. For normal goods, higher incomes lead to increased demand, shifting the demand curve outward. For inferior goods, demand diminishes as consumers opt for superior alternatives, shifting the demand inward. Rebuilding the graph with these considerations shows the direction and magnitude of demand shifts under different income scenarios.

Decreasing the number of sellers reduces market supply, as fewer producers are available. This shift causes the supply curve to shift leftward, elevating the equilibrium price and reducing the quantity exchanged. The overall market becomes less competitive, potentially leading to higher prices for consumers.

The distinction between a normal good and an inferior good hinges on consumer income response: normal goods see increased demand with rising income, whereas inferior goods experience decreased demand under the same circumstance. This classification affects market behavior and strategic planning for firms and policymakers.

Answers to question 7 vary depending on whether the product is normal or inferior because demand elasticity responds differently to income changes. Recognizing this difference is critical for accurate market analysis and policy formulation, ensuring appropriate responses to economic shifts.

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