Analyzing the Impact of Price Changes on Supply and Demand: A Graphical Analysis
Objective: The objective of this assignment is to develop your understanding of how changes in price affect supply and demand in a market using graphical analysis. By examining various scenarios and applying economic principles, you will predict and analyze the effects of price changes on the behavior of buyers and sellers.
Pick a specific product or service for analysis. It can be any good or service that you are interested in or have knowledge about to create a supply and demand graph for the chosen product/service. Use the conventional supply and demand model with price on the vertical axis and quantity on the horizontal axis. Label the axes appropriately.
Once you have your conventional supply/demand model, present the following:
Identify the initial equilibrium price and quantity for the product/service. Explain the factors that determine supply and demand for the chosen item and how they influence the equilibrium.
Predict and illustrate graphically the effect of an increase in price on both supply and demand. Explain the rationale behind your predictions. Consider factors such as changes in production costs, availability of inputs, consumer preferences, or any other relevant factors that could affect supply and demand.
Predict and illustrate graphically the effect of a decrease in price on both supply and demand. Again, provide a rationale for your predictions based on economic principles and real-world considerations.
Write a short report that explains your graphs/questions above and include the supply and demand graphs in your report. You may choose to hand-draw the graphs and scan them or use software such as Microsoft Excel or graphing tools available online.
Reference
Greenlaw, S.A, & Shapiro, D. (2017). Principles of Economics (2nd ed.). OpenStax. https://openstax.org/books/principles-economics-2e/pages/1-introduction