Economics Assignment 10

Discuss the situation by writing the solutions, and then show thesolutions and how you got here in one or more graphs or flowcharts.

Scenario One

Supply and demand are foundational concepts in understanding economictheory. Whether you are a coffee drinker or not, you have been taskedto examine the impact of supply and demand when dealing with the coffeeretail industry. A few companies probably come to mind. Pick a majorcoffee retailer, and then contemplate what has been happening to boththe supply and demand for this product.

Next, analyze the following scenario that deals with what happened in the coffee industry at the beginning of the last decade:

In the early part of the last decade, there was an overproduction ofcoffee. The price dropped so low that producers’ costs were higher thanthe market price. The reason this happened was that market prices becamehigh before this, and the supply of coffee increased substantially. Inthe meantime, demand for coffee and everything else remained the same.

Coffee prices, as a supply input, went down. In the meantime, gourmetcoffee houses began appearing, which began charging a premium forcoffee in the period of decreasing prices. Gourmet coffee houses tend toopen in high-rent areas and cater to higher income consumers. Becauseof the change they created for taste and preferences and the higherincome market, the gourmet coffee houses had a win-win in a period offalling 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.

For you to demonstrate understanding of supply and demand from theperspective of microeconomics versus macroeconomics, pick 2 of the 10scenarios below and discuss the following questions:

• 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?

The 10 examples for you to consider are as follows:

1. After Hurricane Katrina, what happened to the price of fish?
2. After the development of the microchip, what happened to the price of computers?
3. After the government raised tariffs on imported cheese, what happened to the price of domestic cheese?
4. Polyester suits have become trendy again. What happens to their price?
5. Internet auction sites are becoming more popular, and people are using them more and more.
6. A new health report came out that said red wine lowers cholesterol.
7. The government raises taxes.
8. Inflation increases.
9. Immigration laws are relaxed.
10. The government increases spending.