Question

Chapter 3: In chapter 3 we learn that the supply and demand for a good or service can shift in response to changes in certain variables, and about how supply and demand interact to determine the market equilibrium price. Please identify a price change you have observed in the last few years. Do not choose gasoline or smart/cell phones, please pick something else. Use the supply and demand model to explain the price change you identified in A) above. You should be talking about what happened with supply and demand curves, so please be sure you talk about both of these. You don't need to search the internet for information about this, because I don't care if you are correct. I just want to see if you can use the model to explain price changes, so if your explanation would create the change you observed, that is all I'm looking for. Summarize your explanation with one sentence that mentions what you think has happened to both supply and demand, and how this interaction has resulted in the price change you observed. If both curves are moving, you will need to comment on the relative size of each shift to justify the price change you observed. Please do not try to explain price changes in gasoline or cell phones. Please pick something else. Helpful tip: be sure you discuss both supply AND demand, as they both play a role in determining the price.

Chapter 4a: In our everyday lives as consumers we purchase many goods and services, and we derive consumers' surplus for most of them. With that in mind, please: Identify 3 goods or services you have purchased in the last year, and estimate the amount of consumer surplus you enjoy from those purchases. For each good, please state specifically: The highest amount you would have been willing to pay. The price you actually paid. The amount of consumers’ surplus you received from each item. You should have 3 short paragraphs, one for each good. Do not use a chart, please use words. Helpful tips: Be sure to state exactly the highest price you would have been willing to pay, the price you actually paid, and what your consumer's surplus is. There are many different phrases you can use to communicate the highest price you were willing to pay, but note that the following are incorrect: The price you were willing to pay. Just because you were willing to pay $20 for a good, doesn’t mean this is the highest you were willing to pay. The price you expected to pay. Again, this is not necessarily the highest price you were willing to pay.

Chapter 4b: We are about one-third of the way through the course. How is it going for you? Are your grades where you want them to be? If not, what can you do to remedy the situation? If you want a different result, it is imperative that you change your strategy.

Answer 1

I have observed a price change in cosmetics as the awareness and material need has started to improve. The demand for such products started to improve. Because of greater awareness, demand curve shifted towards the right as more and more people started to demand such products, rise in income levels also played a major role in shifting the demand curve to the right. More sellers in the market also led to the shift in supply curve to the right. Thus increase in demand and supply has led to an equilibrium price which is higher. The demand curve has shifted much more than the supply curve which has led to relative price being higher.

3 goods and services which I have purchased last year are transportation services, talktime for mobile and salon services. Consumer surplus is essentially the price that consumers actually pay and the price that they are willing to pay.

For transportation services. I would have been willing to pay highest amount of $20, but I ended up paying just $10. Thus the consumer surplus was $10.

For mobile, the highest amount I was willing to pay was $6, but I was paying just $3, thus consumer surplus was $3.

For salon services, the highest I was willing to pay was $11, but I was paying $15. Thus there is no consumer surplus in this case.