Problem: Supply and Demand Concepts
As an economist for ABC Plastics, your boss has asked you to respond to some questions she has regarding the company's main product, tablet cases. A marketing research firm recently developed the following supply and demand schedules for tablet cases:
|
Price/Case
|
Quantity Demanded
|
Quantity Supplied
|
|
$24
|
5000
|
18000
|
|
22
|
6000
|
17000
|
|
20
|
7000
|
16000
|
|
18
|
8000
|
15000
|
|
16
|
10000
|
14000
|
|
14
|
11000
|
13000
|
|
12
|
12000
|
12000
|
|
10
|
13000
|
11000
|
|
8
|
14000
|
10000
|
|
6
|
15000
|
9000
|
|
4
|
16000
|
8000
|
|
2
|
17000
|
7000
|
You are to develop a report addressing the following questions and present your findings to the Board of Directors:
Task
1. Now assume that the price of tablet cases drops by 50%. How would this change impact the demand for tablet cases? Explain your answer and reconstruct the graph developed in question one to show this change.
2. Assume that incomes of the consumers in this market increase. What would happen in this market? Explain your answer and reconstruct the graph developed in question one to show this change.
3. Assume that the number of sellers decreases in this market. What would happen in this market? Explain your answer and reconstruct the graph developed in question one to show this change.
4. Explain the difference between a normal good and an inferior good. Would your answers to question 2 change, depending on whether this good is a normal or inferior good? Why or why not?