Question

In: Economics

Market theory Choose two markets from your everyday experience (coffee market, bread market, cell-phone market, etc....

Market theory

Choose two markets from your everyday experience (coffee market, bread market, cell-phone market, etc. Come up with your option). Name 2 factors of each two markets that are shifting the demand and 2 factors of each two markets that are shifting the supply on this particular market. Is the good produced and consumed on this market a normal or inferior good and why? Does the good have close substitutes? Can you think of compliment goods for this good?

Solutions

Expert Solution

I would choose jeans market and cheap airflight market.

Factors that shift the demand curve for these two markets-

i) Increase in income- when income increases purchasing power increases and consumers demand more. This happens with jeans market but does not happen with cheap airflight. Increase in income shifts the demand curve but the opposite direction. It decreases the demand because income increases people tend to prefer more luxuries fights.

Change in price others goods- If price of t shirts fall people will like to demand more jeans as t shirt and jeans are worn together.

If price of trains falls demand for airflights might fall given the short distance.

Factors that shift supply-

i) cost of production- if the price of cloth used in production of jeans rises supply of jeans fall. Or if the price of fuel rises supply of airflight falls as cost of flying has increased which increases cost of production.

ii) Tax- if the tax on production of jeans or airflight has increased their supply will fall.

Jeans is a normal as increase in income leads to higher demand, and cheap airflight is inferior good as people goes for more luxurious flights when income increases.

Jeans has subsitutes like harem pants and trousers. Airflight does not close subsitutes when distance is long but does have of trains, cars.

T shirt is a compliment for jeans and travel bags can be the substitutes for airflights.


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