Ec 2100-Tansey
July 17, 2016
ASSIGNMENT 1 (Due ***Feb 2,2012***)
After completing this exercise, you should better be able to:
Demonstrate written communication skills by articulating and supporting ideas using
appropriate economic terminology
Develop the capability for studying and turning in assignments PAPERLESSLY.
Acquire the habit of reading quality media often and critically
Use elementary microeconomic theory and models to understand buyer and seller
behavior in both the product and resource market.
Apply microeconomic theory and models to current events.
Evaluate the impact of macro and government policy on the firm.
PART I.Supply and Demand. Find four articles, each of which
illustrates just one shift in demand or one shift in supply. The article must be after
January 18, 2012. Use each article to fulfill the following instructions and questions:
#1. Find and place in ONE WORD file an article to illustrate each (and every) one (and
not more than one) of the following four possible shifts of supply or demand:
a.
b.
c.
d.
Leftward (upward) shift of the supply curve.
Rightward (downward) shift of the supply curve.
Leftward (downward) shift of the demand curve.
Rightward (upward) shift of the demand curve.
In other words, each of these four shifts should be illustrated with one article each. All
four articles should be included in this homework.
#2.
Write down underneath each of your articles the shift of demand or supply (from
the possible answers in #1) that is best represented in the article. The shift may
already have occurred, may be occurring currently, or may occur in the future.
WATCH OUT! MOST ARTICLES HAVE MANY DIFFERENT SHIFTS. YOU
WANT TO MAKE THE BEST CASE FOR JUST ONE SHIFT. EVERYTHING
YOU INDICATE (UNDERLINE, CIRCLE, BRACKET, OR COLOR) MUST
BE CONSISTENT WITH THAT SHIFT.
#3
[Bracket] evidence in the article of whether the market is an
a. International market,
b. National market,
c. Regional market, or
d. Local market.
#4
Write down under the shift you chose in question #2 which of the four answers in
#3 best characterizes the market AND GIVE THE NAME OF THE MARKET.
#5. Underline in each article the single sentence (not more than a sentence) that
describes the change in the determinant of demand or supply that has caused the shift you
chose in #1 above.
#6.
Under your answer to #4 write down which determinant of demand or supply has
changed. Possible answers are: income, seller expectations, buyer expectations, number
of buyers, number of sellers, technological change, price of resources, price of
substitutes, price of complements, or tastes or preferences. KEY to grading: be consistent
with the type of demand or supply shift you have chosen.
#7.
Place parentheses and paint (bold red) the word or phrase (not more than a
sentence) in each article that indicates through whom (buyer, seller) the change in the
determinant of demand or supply initially affects the market to cause the shift (in #2
above), ceteris paribus. KEY to grading: be consistent with the type of demand or supply
shift you have chosen.
#8.
Under your answer to #6 write down "Buyer" or "Seller", reflecting through
whom the shift is initially caused. KEY to grading: be consistent with the type of
demand or supply shift you have chosen.
#9. Circle and paint in bold blue the single sentence (not more than a sentence) of a
change in price or quantity that results from the shift in demand or supply. KEY to
grading: be consistent with the type of demand or supply shift you have chosen.
#10. Under your answer to #8, describe the changes in price and quantity that occur due
to the shift you have chosen to illustrate one of the following (use exactly these words):
a.
Price and quantity both rise.
b.
Price and quantity both fall.
c.
Price rises and quantity falls.
d.
Price falls and quantity rises.
#11. Give the reference (newspaper or magazine, date, page number) or the internet site
and the date for the media article you have used.
EXAMPLES: find Example at cte.rockhurst.edu/tanseym at EC 2000 under “Assn #1
Example”
HINT on PART I:
This assignment is designed to give you practice in disentangling the different shifts.
Economic analysis requires you to use a "ceteris paribus" approach to analyze one effect at a
time before you can use the integrative approach effectively to weigh the net effect of many
different changes.
Take a look at the following example:
GM denies slowdown in '05 orders
Wagoner acknowledges higher inventories, but says dealers are taking on new models.
August 20, 2004: 11:43 PM EDT
DETROIT (Reuters) A report in Friday's editions of The Wall Street Journal said dealers
were scaling back their orders because they are overloaded with 2004 vehicles, and are
concerned that big discounts are losing their punch with consumers worried about the
economy and slow U.S. job growth.
This little article has two different shifts in it. The demand has shifted left due to buyers
having less income. As a result, sellers have changed their expectations about future
demand and have therefore shifted their supply curves to the left. You will find many
articles that tangle multiple shifts of supply and demand. In this assignment the object is to
separate the different shifts, not to out arm waving to show how brilliant you can confuse
yourself. So if you were using the quotation for the demand shift you would turn in the
following:
DETROIT (Reuters) A report in Friday's editions of The Wall Street Journal said dealers
were scaling back their orders because they are overloaded with 2004 vehicles, and are
concerned that big discounts are losing their punch with (consumers) worried about the
economy and slow U.S. job growth.
#2
Leftward (downward) shift of the demand curve.
#3
National market,
#4
Retail auto market
#6.
buyer expectations
#8.
Buyer
#10. Price and quantity both fall.
Here is the same article analyzed with respect to the supply shift
DETROIT (Reuters) A report in Friday's editions of The Wall Street Journal said
(dealers) were scaling back their orders because they are overloaded with 2004 vehicles,
and are concerned that big discounts are losing their punch with consumers worried about
the economy and slow U.S. job growth.
#2
Leftward (upward) shift of the supply curve.
#3
Local market,
#4
Retail auto market
#6.
seller expectations
#8.
Seller
#10. Price rises and quantity falls.
Please be careful about what market you’re in. If you looked at the wholesale market
into which manufacturers sell and dealers become the buyer, here is how you would
analyze this:
DETROIT (Reuters) A report in Friday's editions of The Wall Street Journal said
(dealers) were scaling back their orders because they are overloaded with 2004 vehicles,
and are concerned that big discounts are losing their punch with consumers worried about
the economy and slow [U.S.] job growth.
#2
Leftward (downward) shift of the demand curve.
#3
National market,
#4
Wholesale auto market
#6.
buyer expectations
#8.
buyer
#10. Price and quantity both fall.
The supply and demand shift are separate shifts. Before you can integrate multiple shifts
into a cogent analysis, you have to be able to separate them out and analyze them separately.
I’m not asking you to integrate multiple shifts into a coherent analysis- we have a whole
course to do that. This assignment is graded on your ability to find just one shift and to be
able consistently to analyze all of the ramifications of that single shift. BY ALL MEANS
DO NOT MIX SHIFTS. MAKE THE CASE FOR JUST ONE SHIFT IN EACH OF
YOUR ARTICLES. (However, if you want to use just one article and analyze it for all four
shifts go ahead, but copy the article four times and analyze each shift separately)
BIG HINT! THE 10 QUESTIONS MUST BE CONSISTENT WITH EACH
OTHER. TO MAKE SURE YOUR ANSWERS TO #10 ARE CONSISTENT
WITH YOUR ANSWERS TO #2 YOU CAN USE THE FOLLOWING DIAGRAM:
Lower Price
Lower
Output
Higher Price
Leftward
(downward)
Shift of Demand
Leftward
(upward)
Shift of
Supply
Higher
Output
Rightward
(downward)
Shift of
Supply
Rightward
(upward)
Shift of Demand
Breakdown all shifts into their output and price vectors
READ THE CLASS HANDOUT TO MAKE SURE THAT YOUR
DETERMINANTS OF DEMAND AND SUPPLY (#6) ARE CONSISTENT WITH
THE CURVE THAT YOU SAY IS SHIFTING (#2)
FINALLY. BE SURE YOU ILLUSTRATE EACH OF THE FOUR SHIFTS
PICTURED ABOVE
PART II.DISEQUILIBRIUM. Find an article which illustrates just
ONE of the following disequilibrium situations caused by government intervention
within a market:
The article must be after January 18, 2012. Use the article to fulfill the following
instructions and questions:
#1. Write down underneath your article which of the following interventions you think
your article best represents:
a. Minimum output quota
b. Minimum price control
c. Maximum price control
d. Maximum output control
#2. Underline and paint (bold red) the single sentence (not more than a sentence) in the
article that describes the intervention that causes the price or output control that you
chose in #1 above.
#3.
Place parentheses and paint in bold blue the word or phrase (not more than a
sentence) in the article that indicates the disequilibrium caused by the government
intervention.
#4. Write down underneath your answer to #1which of the following disequilibria you
have chosen to illustrate in #3.
a. Shortage with a shadow price higher than the pre-intervention market equilibrium
price
b. Surplus with a shadow price lower than the pre-intervention market equilibrium
price
c. Shortage with a shadow price lower than the pre-intervention market equilibrium
price
d. Surplus with a shadow price higher than the pre-intervention market equilibrium
price
e. Surplus financed by a government subsidy at a price higher than the preintervention market equilibrium price to achieve the intervention goal.
(Hint: KEY to grading: be consistent with the type of demand or supply shift you have
chosen.)
#5. Circle in green the single sentence (not more than a sentence) of a change in price or
quantity that results from the government intervention. KEY to grading: be consistent
with the type of government intervention you have chosen.
#6. Under your answer to #4, describe the changes in price and quantity that occur due
to the intervention you have chosen to illustrate one of the following (use exactly these
words):
e.
Perceived price and perceived quantity both rise.
f.
Perceived price and perceived quantity both fall.
g.
Perceived price rises and perceived quantity falls.
h.
Perceived price falls and perceived quantity rises.
#7. Give the reference (newspaper or magazine, date, page number) or the internet site
and the date for the media article you have used.
EXAMPLES: find Example at cte.rockhurst.edu/tanseym at EC 2100 under “Assn #1
Example”
#8 send all five articles (used in both Parts 1 and II above) and the answers to the
questions to me under the filename *** “mic12slastnameAssn01”.***