Question

select a country Canada and explain the given below (use different example other than ham burgers)

Supply & Demand

Pick a major product (ie. Hamburgers or any other) in your assigned county and describe how supply & demand relates to that product. Now consider the following: If the price of a substitute product (ie. Hotdogs) increases and the price of a complement product (ie. Hamburger buns) increases, can you tell for sure what will happen to the demand for your original product? Why or why not?

Labour & Financial Market -

Suppose your economy began to grow more rapidly than other countries in the world. What would be the likely impact on your financial markets as part of the global economy? How would these impacts affect your country and all other countries?

GDP & Economic Growth

Why do you think that GDP does not grow at a steady rate, but rather speeds up and slows down? Education seems to be important for human capital deepening. As people become better educated and more knowledgeable, are there limits to how much additional benefit more education can provide? Why or why not?

Employment & Unemployment

Using the definition of the unemployment rate, is an increase in the unemployment rate necessarily a good/bad thing for your nation? Explain.

Is a decrease in the unemployment rate necessarily a good/bad thing for a nation? Explain.

Answer 1

Consider the market for Shoes in Canada. Supply of shoes in the market will depend on total number of shoes being sold by all suppliers of shoes at each price, and the demand will depend on how many shoes all the consumers are willing to buy at each price. If the price of a substitute product,say Flip-Flops increase then shoes will get relatively cheaper compared to Flip-Flops which will shift the demand curve of shoes to the right (increase in demand for shoes). Now, if the price of a complementary good to shoes, socks, increases this will make consuming shoes and socks relatively more expensive than consuming a flip-flop because we need socks to wear shoes and hence will shift the demand curve of the shoes to the left(decrease in demand for shoes). For example, if a pair of shoes,socks and flip-flops cost CAD $60,CAD $10 and CAD $15 respectively, initially. And now the price for socks and flip-flops increases to CAD $12 and CAD $20 respectively. Then the new relative price of flip-flops has gone up from 0.25 to 0.33 with respect to shoes and hence it is relatively cheaper to buy shoes. Similarly, people now would be less willing to buy shoes as the price of socks has gone up. The price ratio of socks to new price of flip flops has gone up by 20%. It is a 20% increase in the relative price of flip-flops with respect to shoes. In this example demand for shoes is unchanged because the extent of price increase in both is same.

In general to predict the overall effect on the demand for shoes we need to know the extent of the price change in the complementary and substitution goods. If the extent of increase in substitution good is much higher than increase in price of complementary good then people will still demand shoes. And they will demand lesser shoes if the increase in price of the complementary good is much higher than the increase in price of the substitution good.