Supply and demand analysis

Supply and demand analysis is more difficult than we often imagine, but there is a step-by-step process to follow. 1. Identify the industry or market being analyzed. For example, if we were interested in the airline industry, we might be analyzing the commercial aircraft manufacturing industry for which Airbus and Boeing are the major suppliers or the domestic airline industry where US airlines are the suppliers. 2. Identify the suppliers, usually firms, and the demanders. The demanders could be consumers or other firms. 3. Identify the factors (shifters) that will shift the supply or demand curves. Arnold explains the factors that shift the demand curve and those that shift the supply curve. There is little overlap. If you are like the average student, everything in your instinct will cause you to avoid this step relying instead on your intuition. Intuition is great but often will serve you poorly in economic analysis. And yes, you will need to refer to the textbook. If you overlook this step, it is likely that your analysis will be faulty. 4. Having identified the factor(s) that shift the demand and supply curves, you will know which curve shifts and in which direction. Insert the shifted curves into your supply and demand diagram. As a simplifying assumption, supply and demand analysis always begins with the market in equilibrium. Nothing changes and you cannot make any predictions about the change in price or quantity until a curve shifts. 5. Once the shifted curve(s) are inserted in the diagram, there will be a new equilibrium. Now compare the price and quantity at the initial and new equilibrium. These changes are your theoretical predictions. If you are analyzing past changes in the market, there is usually data available on price and quantity. Check to see if these data support your predictions. Supply and demand analysis does work and is useful in business in the real world. If your predictions are not supported by data, it is likely that there is a theoretical error in your analysis. For example, if the price of oil increases, the supply curve for airlines will shift left. At the new equilibrium, the price will rise and quantity (the number of flights) will fall. If the price data show falling prices, there’s something wrong. Follow these steps in the M2 assignment. Armed with the knowledge you are gaining from this module week’s summit session, it’s now time for us to apply what we are learning! For this activity, complete four of the five scenario-based problems. Prepare a document to explain your answers and graph your solutions. Make sure to use references in APA format to support your positions. Joshua’s income increases but so have his federal income taxes; therefore, please illustrate by constructing a supply and demand graph, the direction in which the curves will shift and state the new equilibrium price and quantity; for example, state whether price and quantity increased, decreased, or are indeterminate. Please explain your rationale based on the determinants of demand and supply. Apply your analysis to goods that Joshua currently purchases. Winston is disappointed in the new SUV he recently purchased. He was excited about the new technology incorporated in his SUV but it did not live up to his expectations. Assume that his assessment is shared by automotive reporters and widely published; therefore, please illustrate by constructing a supply and demand graph, the direction in which the curves will shift and state the new equilibrium price and quantity; for example, state whether price and quantity increased, decreased, or are indeterminate. Please explain your rationale based on the determinants of demand and supply. Analyze the market for this SUV. Kim is in the market for a new automobile and, since she was just promoted at work, her tastes in higher-end automobiles has increased, but, to her surprise, a new federal law also decreased her income taxes, which make a new automobile more attractive; therefore, please illustrate by constructing a supply and demand graph, the direction in which the curves will shift and state the new equilibrium price and quantity; for example, state whether price and quantity increased, decreased, or are indeterminate. Please explain your rationale based on the determinants of demand and supply. Analyze the market for higher-end cars. U.S. agricultural farmers are excited since the government announced an increase in subsidies even though the substitutes for agricultural goods that are imported have increased in demand; therefore, please illustrate by constructing a supply and demand graph, the direction in which the curves will shift and state the new equilibrium price and quantity; for example, state whether price and quantity increased, decreased, or are indeterminate. Please explain your rationale based on the determinants of demand and supply. Analyze the market for domestic agricultural products. Due to advanced technology, substitute goods for higher education have seen an increase in demand. Please illustrate this circumstance by constructing a supply and demand graph, showing the direction in which the curves will shift, and state the new equilibrium price and quantity; for example, state whether price and quantity increased, decreased, or are indeterminate. Please explain your rationale based on the determinants of demand and supply. Analyze the market for traditional higher education such as that provided by ERAU. Your paper will automatically be evaluated through Turnitin when you submit your assignment in this activity. Turnitin is a service that checks your work for improper citation or potential plagiarism by comparing it against a database of web pages, student papers, and articles from academic books and publications. Ensure that your work is entirely your own and that you have not plagiarized any material!