Question

In: Economics

Select a market for a product or service, then identify at least one critical determinant of...

Select a market for a product or service, then identify at least one critical determinant of demand or supply in that selected market and forecast a reasonable future change in the determinant. These "determinants" are also called "shifters" in our textbook. Explain the changes in equilibrium price and quantity you expect for that market. A graph is not required, however, it is helpful and illustrative that you fully comprehends this week’s material.

For this topic I choose the housing market ,one critical determinant of housing market is the interest rate.The mortgage rates are expected to be low in 2018 which will create demand for housing. If demand increases and supply remains constant, the demand curve will shift outwards and equilibrium price and quantity will increase.

What determinant would an economist say is the main one at play here in the burger market?

Solutions

Expert Solution

We shall consider the Market for Crude oil for this exercise:

Critical Determinants of demand of Crude oil:

  • American Shale Gas output
  • Price of Crude Oil
  • Economic State of Major Oil Consuming Economies
  • Political Crisis like Wars
  • Depreciation in value of dollar

Critical determinants of Supply of Crude Oil

  • Quantity decided to be produced by the oil cartel OPEC
  • Technological Advancements like improved machinery

Future changes in the determinants of Demand:

  • US has shifted to Shale Gas and Major economies like China have sluggish growth forecasts, therefore Oil demand is expected to fall
  • Decrease in demand will shift the Demand curve of crude oil and result in decrease in equilibrium Price and Quantity demanded

Future Changes in determinants of Supply:

  • OPEC may decide to increase the Supply of Crude oil drilled which will shift supply of Crude oil and cause further decline in prices

Therefore, as a consequence of change in above determinants, equilibrium price will decrease and quantity supplied will increase


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