Words, Graphs, Details, Weekly Tasks Or Assignments, Individ
500 700 Words Graphsdetailsweekly Tasks Or Assignments Individual
Weekly tasks or assignments (Individual or Group Projects) will be due by Monday and late submissions will be assigned a late penalty in accordance with the late penalty policy found in the syllabus. NOTE : All submission posting times are based on midnight Central Time. In economics, they say a picture is worth a thousand words. Below, you will find two scenarios. Your assignment is to discuss the situation by writing the solutions, and then show the solutions and how you got here in one or more graphs or flowcharts.
Scenario One: Supply and demand are foundational concepts in understanding economic theory. Whether you are a coffee drinker or not, you have been tasked to examine the impact of supply and demand when dealing with the coffee retail industry. A few companies probably come to mind. Pick a major coffee retailer and contemplate what has been happening to both the supply and demand for this product. Next analyze, the following scenario which deals with what happened in the coffee industry at the beginning of last decade: In the early part of the last decade, there was an overproduction of coffee. The price dropped so low that producers' costs were higher than the market price. The reason this happened was that market prices became high before this, and the supply of coffee increased substantially. In the meantime, demand for coffee and everything else remained the same. Coffee prices, as a supply input, went down. In the meantime, gourmet coffee houses began appearing, which began charging a premium for coffee in the period of decreasing prices. Gourmet coffee houses tend to open in high-rent areas and cater to higher income consumers. Because of the change they created for taste and preferences and the higher income market, the gourmet coffee houses had a win-win in a period of falling wholesale prices and increasing retail prices. Explain the changes in the supply and demand creating a supply and demand curve based on the above information. In this graph, be sure to demonstrate how these changes affected the price and quantity levels of supply and demand. Based on this analysis, how were coffee retailers faring in the marketplace?
Scenario Two: In this next scenario, start your discussion by examining the differences between the definitions of the macroeconomics and microeconomics? Next, discuss how the concepts of supply and demand relate to (1) microeconomics and (2) macroeconomics. In order for you to demonstrate understanding of the supply and demand, from the perspective of a microeconomic vs. macroeconomic, pick two of the ten scenarios below and discuss the following: Is the scenario a macroeconomic or microeconomic example of supply and demand? Is this impacting supply or demand? Is this example going to experience a shift or a movement of supply or demand? As a result of this change, what happened to equilibrium price and quantity?
- After Hurricane Katrina, what happened to the price of fish?
- After the development of the microchip, what happened to the price of computers?
- After the government raised tariffs on imported cheese, what happened to the price of domestic cheese?
- Polyester suits have become trendy again. What happens to their price?
- Internet auction sites are becoming more popular, and people are using them more and more.
- A new health report came out that said red wine lowers cholesterol.
- The government raises taxes.
- Inflation increases.
- Immigration laws are relaxed.
- The government increases spending.
Paper For Above instruction
Supply and demand are central to economics, providing foundational understanding of how markets operate. In exploring the impact of supply and demand within the coffee industry, one can observe significant shifts influenced by external factors such as overproduction, consumer preferences, and diversification into gourmet coffee offerings. This essay examines these shifts through graphical analysis and discusses their implications for coffee retailers.
Analyzing the Coffee Industry: Supply and Demand Dynamics
At the beginning of the last decade, the coffee market experienced oversupply, leading to a decrease in prices below producers' costs. Graphically, this is represented by a rightward shift of the supply curve (S1 to S2), indicating an increase in supply, coupled with a static demand curve (D1), reflecting unchanged consumer preferences. The oversupply results in a new equilibrium at a lower price (P2) and a higher quantity (Q2) compared to the original equilibrium (P1, Q1). This condition creates a market loss for producers as prices fall below their production costs, potentially leading to decreased production or exit from the market.
Meanwhile, gourmet coffee houses entered the market, targeting high-income consumers and positioning themselves in premium locations. This consumer preference shift toward specialty coffees effectively increases demand for premium coffee, represented by a rightward shift of the demand curve (D1 to D2). As a result, the demand at higher prices (P3) increases, leading to a new equilibrium characterized by higher retail prices despite falling wholesale prices. Graphically, the demand increase causes the equilibrium price to rise from P2 to P3 and the quantity sold to increase correspondingly.
The interaction of these shifts reveals a complex market dynamic. Although wholesale prices decreased because of overproduction, retail prices increased due to changes in consumer preferences, primarily the rise of gourmet coffee. For coffee retailers, this meant a challenging period of decreased margins at the wholesale level but opportunities for higher retail margins in premium segments. Overall, large chain retailers faced pressure to adapt their strategies, perhaps by diversifying offerings or elevating product quality to capitalize on consumer preferences for gourmet coffee. Smaller specialty coffee shops thrived by focusing on the premium market niche, even amid lower wholesale prices.
Graphical Representation
The supply and demand curve shifts illustrate the critical factors: the initial oversupply shifts the supply curve rightward, decreasing prices (P1 to P2). Simultaneously, a shift in demand toward premium coffee pushes the demand curve rightward (D1 to D2), raising retail prices. Final equilibrium involves a lower wholesale price but a higher retail price and increased quantity sold through gourmet outlets. A combined diagram with two demand curves and two supply curves will depict these shifts clearly, emphasizing the different market segments within the coffee industry.
Implications for Coffee Retailers
In conclusion, despite the initial downturn caused by oversupply and falling prices, the rise of gourmet coffee created new market segments and revenue streams. Retailers willing to adapt to consumer preferences could maintain profitability or even expand. However, traditional coffee retailers faced challenges due to squeezed margins and the necessity to differentiate themselves through quality or branding. The graphical analysis highlights that understanding supply and demand shifts enables stakeholders to anticipate market trends and strategize accordingly.
Microeconomics vs. Macroeconomics: Concepts and Scenarios
Microeconomics focuses on individual markets and the decisions of consumers and producers, while macroeconomics examines aggregated economic indicators and broad phenomena such as inflation, unemployment, or national income. Both fields utilize supply and demand but differ in scope.
In microeconomics, supply and demand analyze specific products or markets. For example, the effect of tariffs on domestic cheese exemplifies how government policies directly influence prices within the market—creating a shift in supply due to increased costs for importers, leading to a higher equilibrium price. Conversely, macroeconomic examples like inflation increase affect overall price levels across many sectors, influencing aggregate demand and supply, leading to broad shifts in price and output levels.
Choosing two scenarios: the impact of Hurricane Katrina on fish prices versus the development of the microchip and its effect on computer prices, illustrates different economic scopes.
Hurricane Katrina and Fish Prices: Microeconomic Perspective
Hurricane Katrina disrupted fishing routes and port operations, leading to a decrease in supply. Graphically, the supply curve shifts leftward (S1 to S2), causing a rise in the equilibrium price (P1 to P2) and a decrease in quantity (Q1 to Q2). This microeconomic event directly impacts fish suppliers and consumers, with short-term scarcer supplies raising prices. The shift is temporary, tied to the disaster's aftermath.
Development of Microchip and Computer Prices: Microeconomic Effect
The innovation of the microchip increased technological efficiency and production capacity for computers. This technological advancement shifts the supply curve rightward (S1 to S2), resulting in a lower equilibrium price (P1 to P2) and higher quantity (Q1 to Q2), making computers more affordable for consumers. The impact reflects a classic supply-side technological improvement within a specific market, demonstrating a shift in supply rather than demand.
Conclusion
Understanding the nuances between microeconomics and macroeconomics enhances the analysis of market behaviors through supply and demand. Microeconomic scenarios focus on specific markets, where shifts predominantly arise from changes in supply or demand at the individual level, such as tariffs or natural disasters. Macro-level shifts involve broader economic factors like inflation or government spending, influencing entire economies. Recognizing whether an event causes a shift or movement in supply or demand helps predict how prices and quantities will respond, guiding businesses and policymakers in decision-making.