Question

- Supply and Demand Assignment

The paper should consist the following sections: the title page, main body, and references.

Select a market that is of interest. Use what you know about this industry and knowledge from this course to answer the questions below. Markets that might be of interest (or select your own market of interest):

• Housing market (or housing rental market) in Toronto/Ontario/Canada or any other location
• Market for mobile phone service
• Market for tablets (i.e. iPad, Samsung Galaxy Tab, etc.)
• Market for groceries
• Market for community college business programs

For each of the questions below, explain and justify your analysis using current events and market facts you have researched to support your conclusions.

• Identify and explain two factors that have caused a shift in the demand curve. Illustrate the impact on the market using supply and demand curves.
• Identify and explain two factors that have caused a shift in the supply curve. Illustrate the impact on the market using supply and demand curves.
• Identify and explain one government intervention relating to this market. Explain the government’s economic objective and illustrate the impact on the market using supply and demand curves.

Answer 1

Market for groceries

This market consists of essential consumer goods consumed by every household ,say----- Rice,wheat,sugar,pulses,cooking oil etc.

Grocery Market Competition

The demand and supply forces operate independently in the grocery market ,that means ,prices and quantity ,both are determined on the basis of intersection of demand and supply curve for each of grocery product.

See the market Equilibrium in the graph below----

#Equilibrium in foodgrains matket

The market Equilibrium point E determines the Equilibrium Quantity Qe and Equilibrium price Pe

#2 factors causing shift in Demand Curve

When there is a change in demand ( increase or decrease), it is due to change in the following factors other than price----

(1) change in income of consumer--- With increase in income of Consumers,the demand increases and vice-versa

(2) change in size of consumer group--- with increases in the size of Consumers,the demand for foodgrains increases and vice versa

- The demand curve shifts either rightward( increase in demand) or leftward( Decrease in demand)

Impact of shift in demand curve on market for foodgrains

Point E' depicts ,there is rightward shift of demand curve to D'

Due to this Equilibrium Quantity increases to Qe' and Equilibrium price rises to Pe'.

Point E2 depicts there is a leftwards shift of demand curve due to which, the Equilibrium Quantity Decreases to Qe2 and Equilibrium price falls to Pe2

# 2 factors causing shift in supply curve of foodgrains

When there is either increase or decrease in supply due to the factors other than price,it is called shift in Supply.

The factors are------

(1) change in input price----- If the price of fertilisers used in fatming of foodgrains increases, the farmers will supply lesser Quantity in the market and there will be decrease in supply and vise versa

(2) change in govt policy---- It govt imposes taxes on supply of foodgrains,the supply will decrease .Supply will increase if govt provides subsidy to producers.

Impact of shift in supply curve on market for foodgrains

S1 curve shows the rightward shift of Supply curve,which determines Equilibrium Quantity Qe1(Increase) and Equilibrium price Pe1( falls)

S2 curve shows leftward shift of Supply Curve at Equilibrium point E 2 ,due to which equlibrium quantity Decreases to Qe2 & equlibrium price rises to Pe2

# Govt intervention relating to the foodgrains matket

In order to protect either producers or consumers from their exploitation ,the govt has to intervene through implementation of price control in the form of ----

- price floor

-Price ceiling

Govt Economic objective regarding price control(price floor)

The govt implements price control when it realises that there is some sort of exploitation of either producers or consumers in regards to prices of essential products.

price floor

By implementing price floor,it protects producers of essential products in terms of setting minimum price below which that particular commodity can't be bought in the market

price ceiling

Similarly by imposing price ceiling,the govt intervenes to protect consumers from exploitation of sellers in regards to maximum price beyond which ,a particular product can't be sold.

Impact on the foodgrain market due to price floor

In the graph ,we find that price floor is imposed above the Equilibrium price of foodgrains ,it is binding on the consumers rhat they can't buy foodgrains below this floor price.

We also find that there is surplus because ----------supply> demand