Assignment 3: Understanding Market Dynamics

In this assignment, we will analyze various scenarios in the context of perfectly competitive markets and use graphical representations to visualize their effects on equilibrium prices and quantities.

Supply and Demand Curves for Basketball Tickets

Let’s start by drawing the supply and demand curves for basketball tickets based on the provided data:

Demand Curve (D): This downward-sloping curve represents the quantity of tickets demanded at different prices. As the price decreases, the quantity demanded increases.

Supply Curve (S): The supply curve is perfectly elastic and represents a constant quantity supplied at different prices, in this case, 8000 tickets at all price levels.

From the graph, we can see that the supply curve is a horizontal line at 8000 tickets, indicating that the supply remains constant regardless of the price. This suggests that the supply of basketball tickets is perfectly elastic in this market.

Equilibrium Price and Quantity: The equilibrium occurs at the intersection of the supply and demand curves, where the quantity demanded equals the quantity supplied. In this case, the equilibrium price is $8, and the equilibrium quantity is 8000 tickets.

2. Expansion of College and New Demand Schedule

Now, let’s consider the expansion of the college and the addition of 5000 new students with their demand schedule:

We need to calculate the total demand schedule for the entire college, combining the original demand and the new demand:

New Demand Curve (D New): When we combine the original demand with the new students’ demand, we get a new demand curve that reflects the increased total demand for tickets.

New Equilibrium: The new equilibrium price is $12, and the equilibrium quantity is 8000 tickets, as this is the quantity supplied.

 Impact of Environmental Conditions on Salmon Market

In 2015, better weather conditions and increased plankton growth positively affected salmon breeding. Graphically, this would shift the supply curve for salmon to the right, indicating an increase in the quantity supplied. As a result, the price per pound of salmon would likely decrease due to the higher supply.

Impact of CNBC News on Airline Ticket Market

If CNBC suggests that airline ticket prices will be lowest between October 6th and October 31st, it could lead to an increase in demand for tickets during that period. This increased demand might lead to higher ticket prices today as people rush to book tickets in advance to secure lower prices.

Effect of US Recession on Motel Market

Assuming motels are inferior goods, during a US recession, consumer incomes may decrease. As a result, consumers might prefer lower-cost accommodations like motels over more expensive options, such as hotels. This increased demand for motels would likely lead to a higher equilibrium quantity and price in the motel market.

 Impact of Cake Price Increase on Ice Cream Market

If consumers consume either ice cream or cake but not both together, an increase in cake prices could lead to a substitution effect. People might choose to buy less cake and more ice cream, leading to an increase in the demand for ice cream. This would shift the demand curve for ice cream to the right, resulting in a higher equilibrium price and quantity in the ice cream market.

In conclusion, understanding market dynamics involves analyzing the effects of various factors on supply and demand curves. Changes in these curves can lead to shifts in equilibrium prices and quantities, impacting market outcomes. Factors such as environmental incidents, news reports, economic conditions, and consumer preferences all play vital roles in shaping market dynamics.