Question

For the scenarios discussed below, use supply and demand curves and a graph to analyze what will happen to both price and quantity in equilibrium given the information available below. Graphs MUST be half a page each. When it is impossible to pin down the direction of the effect, discuss what is more likely in your opinion and why. Make sure to differentiate between movements of curves and movements on curves. For example, you could say something like this: “the supply curve moves to the right. As a result, price decreases, and quantity supplied (and demanded) in equilibrium increases”

1. You are the CEO of American Airlines. Your market research people inform you that Southwest is about to enter the Northeastern US market, where it does not currently operate. Analyze the market for flights in the Northeast.
2. You are the CEO of Philip Morris. The FDA announces that cigarettes are unhealthy. Analyze the market for cigarettes. What could you do to increase profitability given the news?
3. You are the CEO of Toyota. Your engineers have just developed a new robot that reduced the costs involved with manufacturing a new car by 10%. The robot is not available to your competitors. Analyze the car sales market. Remember to differentiate between your supply and supply by other firms and show how each is affected as well as what happened to total quantity, price, and your market share. Hint – remember that market supply is the sum of your supply and your competitors’ supply.
4. You are the CEO of Coca-cola. The FDA introduces a $2 per meal tax on fast-food (but not on drinks). Analyze the market for your products. It is the fast food sellers who are obliged to pay the tax to the state.
5. You are the CEO of Coca-cola. The price of sugar increases. Analyze the results in both the regular Coke and Diet-Coke markets.

Answer 1