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In economics, they say a picture is worth a thousand words. Below, you will find four scenarios. Your assignment is to discuss the situation by writing the solutions, and then show the solutions and...

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In economics, they say a picture is worth a thousand words. Below, you will find four 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 as requested.

Scenario One

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.Price Level 1.

Coffee prices came down again, at first overshooting the former equilibrium price, throwing the coffee market into confusion. In the meantime, gourmet coffee houses began appearing, which began charging a premium for coffee in the period of falling prices.Price Level 2.

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.Price Level 3.

But in the middle of the decade, the party was over, and wholesale prices started increasing because of some shortages caused by weather and the rising overall market prices again. Where is the new equilibrium price?Price Level 4.

Explain the changes in the supply and demand curves based on the above information. Draw a graph showing how the changes affect the price levels, supply and demand.

Scenario Two

You have been asked to discuss the differences between the microeconomic definitions of supply and demand and the macroeconomic differences of aggregate supply and demand. Discuss what determines supply and demand and aggregate supply and aggregate demand.Explain what causes movements along the curve and shifts in the curve for supply and demand and aggregate supply and aggregate demand (make sure that you include price as a variable). Include whether this is an example of the microeconomic definition of supply and demand or the macroeconomic definition of aggregate supply and demand. Most importantly, did this cause a shift in the curves or a movement along the curves? What happened to equilibrium price, supply, demand, aggregate supply or aggregate demand? Describe your graphs.

  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. An 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.

Scenario Three

The PPF curve shows the economic choices a country can make about production given scarce resources, a given technology, and a given quantity of inputs. Assume you are a developing country, producing food and clothing at maximum capacity. What could happen when foreign investorsstart investing in your country?

Discuss what type of foreign investments would be best for the economy’s PPF. What are the opportunity costs of these decisions?

Include what will happen to private and public choices as the economy grows. Support your discussion of these issues and consequences using at least 2 graphs.

1200+ words and graphs

Answered Same Day Dec 20, 2021

Solution

David answered on Dec 20 2021
125 Votes
In economics, they say a picture is worth a thousand words. Below, you will find four 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 as requested.
Scenario One
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.Price Level 1.
High prices (Pf) caused producers to make more abnormal profits. All producers started to produce more expecting price to stay high and profits were anticipated. As all of them increased supply the supply curve for coffee( which is sum of supply of all producers)shifted downwards,(SS1 to SS2) leading to lower price (P1) and higher quantity of coffee. This happened as each producer took a decision to increase supply at her level. When all such decisions are combined we have supply curve shifting downwards.
Coffee prices came down again, at first overshooting the former equili
ium price, throwing the coffee market into confusion. In the meantime, gourmet coffee houses began appearing, which began charging a premium for coffee in the period of falling prices.Price Level 2.
The demand for coffee rises causing demand curve to shift upwards.(Dd1 to DD2) This will cause prices to rise from P1 levels to P2 ( with supply still at SS2). So the coffee houses are happy as they buy at prices lower than Pf
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.Price Level 3.
Demand keeps rising causing shift of DD2 to DD3. Price is now P3. Coffee houses are happy as then pay less than Pf and also get more price for coffee as the price of gourmet coffee rises on the basis of rise in demand for it as preferences are shifting in its favour.
But in the middle of the decade, the party was over, and wholesale prices started increasing because of some shortages caused by weather and the rising overall market prices again. Where is the new equili
ium price?Price Level 4.
The supply curve shifts up to SS3 causing rices to rise to P$. this P$ > Pf
It is also possible that P$ is somewhere between P3 and Pf-it depends on the decline in supply.
Price of coffee
P4
SS3
SS1
Pf
Ss2
P3
P2
P1
DD2
DD3
DD1
Quantity of coffee
Explain the changes in the supply and demand curves based on the above information. Draw a graph showing how the changes affect the price levels, supply and demand.
Scenario Two
You have been asked to discuss the differences between the microeconomic definitions of supply and demand and the macroeconomic differences of aggregate supply and demand. Discuss what determines supply and demand and aggregate supply and aggregate demand.Explain what causes movements along the curve and shifts in the curve for supply and demand and aggregate supply and aggregate demand (make sure that you include price as a variable). Include whether this is an example of the microeconomic definition of supply and demand or the macroeconomic definition of aggregate supply and demand. Most importantly, did this cause a shift in the...
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