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Click on the links above to learn how to
use a supply and demand graph to show why prices and
quantities change. The exam 1 extra credit question will be
similar to these problems.
Use the four-step process
to explain what happens to PRICE (P) and QUANTITY (Q) of
the following goods using the information provided in the
short news articles below.
Four Step
Process
1. Which determinant
has changed?
2. Will it affect Supply (S) or Demand (D)?
3. Will S or D increase or decrease?
4. GRAPH IT and show what happens to P and
Q.
Non--Price Determinants of
Demand (PPINT)
Pe -- expected
price
Pog -- price of other goods (subs and Complw)
I - income (normal and inferior goods)
N -- number of POTENTIAL consumers
T -- tastes and preferences
Non-Price Determinants of
Supply (PPPTTN)
Pe -- expected
price
Pog -- price of other goods PRODUCED. BY THE SAME
FIRM
Pres -- price of resources
T - technology of production
T -- taxes and subsidies
N -- number of sellers
Product: Beef. What
happens to P and Q? Circle and label determinants. Show
effects on a graph.
http://www.bloomberg.com/news/articles/2014-11-18/us-beef-supply-will-fall-again-in-2015-chicken-demand-will-rise
"Domestic beef production
has been waning [decreasing] for years because of
rising feed and energy prices. A drought in 2012 caused
feed prices to spike and, in response, farmers thinned
their herds."
Product: Chicken. What
happens to P and Q? Circle and label determinants. Show
effects on a graph.
http://www.bloomberg.com/news/articles/2014-11-18/us-beef-supply-will-fall-again-in-2015-chicken-demand-will-rise
"It's been an expensive
year to eat beef, and 2015 doesn't look any cheaper. . .
. Consumers have traded down to less expensive meats such
as chicken."
Product: Almonds. What
happens to P and Q? Circle and label determinants. Show
effects on a graph.
http://www.cnbc.com/2016/08/29/california-almond-harvest-may-break-records-despite-drought.html
"With the drought easing
in parts of California, this year's almond harvest is
shaping up to be a record haul …. Consumers have
already taken an interest in almond products because of
their 'heart health' benefits."
Product: McDonald's meals.
What happens to P and Q? Circle and label determinants.
Show effects on a graph.
http://www.bloomberg.com/news/articles/2014-10-20/mcdonald-s-costly-burgers-send-diners-to-fancier-rivals
"Mike Hiner used to take
his grandsons to McDonald's when they wanted a treat.
With higher wage and food costs pushing up prices at the
Golden Arches, he's increasingly taking them to IHOP,
Denny's and Chili's instead . . . . The chain's
diminishing appeal among budget diners -- coupled with
rising meat costs -- are projected to take a bite out of
third-quarter earnings due to be reported
tomorrow."
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