Changes in Equilibrium Price

Background

In Module 2 you are learning how the supply and demand model can be used to predict changes in the equilibrium price and equilibrium quantity of any good or service sold in competitive markets. The 3-step approach to changes in equilibrium is the method that you will apply in this assignment to make your theoretical predictions. Furthermore, you will compare these predictions with the information referenced in your chosen article. 

Instructions

• This assignment has four questions. To receive full credit (35 points), you need to answer all of them in the consecutive order presented below.
• Use these  if you are uncertain about anything, have questions, or need clarification.
• These  offer further assistance on how to conduct your analysis, by providing an example of what your answers could be like.

Getting started

Search the Internet using a search engine (such as Google) for a recent article that discusses a change in the price of a good or service sold in a competitive market. For example, search “price increase/decrease,” “price rise/drop”. Avoid articles that refer to a large market, such as an article referring to an increase in “food” prices. Instead, focus for example on the price rise of “eggs”, or “milk”, as specific examples of the large food category. Also, avoid articles about the stock market. Copy the URL address of the website the article was found. 

Answer the following questions

• Provide the web link of the article: www. _______________________.
• State which good or service the article talks about, and whether its price has increased or decreased.
• Step 1: Explain the reasons for the price change, and identify them as one (or more) of the demand shifters and/or supply shifters of the theoretical model you are about to build. (10 points)
• Step 2: State in which direction each curve shifts. (5 points)
• Step 3: Draw the graph(s), and find and label the original and new equilibrium points. Conclude whether the equilibrium price has increased or decreased. Conclude whether the equilibrium quantity has increased or decreased. (12.5 points)
• Explain if your theoretical predictions match the price change referenced in the article, and if available, any information on changes in the quantity sold. (7.5 points)