You have been hired by a new firm selling electronic dog feeders. Your client ha
ID: 2655232 • Letter: Y
Question
You have been hired by a new firm selling electronic dog feeders. Your client has asked you to gather some data on the supply and demand for the feeder, which is given below, and address several questions regarding the supply and demand for these feeders.
Quantity Demanded
Quantity Supplied
$300
500
1800
270
600
1700
240
700
1600
210
800
1500
180
1000
1400
150
1100
1300
120
1200
1200
90
1300
1100
60
1400
1000
30
1500
900
10
1600
800
Your client has asked that you develop a report addressing the following questions so that you can present these findings to their Board of Directors:
Assume that the price floor is removed and a price ceiling is imposed at $90. What would happen in this market?
Now, assume that the price of feeders drops by 50%. How would this change impact the demand for feeders? Explain your answer and reconstruct the graph developed in question one to show this change.
Assume that incomes of the consumers in this market increases. What would happen in this market? Explain your answer and reconstruct the graph developed in question one to show this change.
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.
Explain the difference between a normal good and an inferior good. Would your answers to question 7 change depending on whether this good is a normal or inferior good? Why?
Price/Feeder
Quantity Demanded
Quantity Supplied
$300
500
1800
270
600
1700
240
700
1600
210
800
1500
180
1000
1400
150
1100
1300
120
1200
1200
90
1300
1100
60
1400
1000
30
1500
900
10
1600
800
Explanation / Answer
Your client has asked that you develop a report addressing the following questions so that you can present these findings to their Board of Directors: Assume that the price floor is removed and a price ceiling is imposed at $90. What would happen in this market? In case there is a price ceiling imposed at $90, the demand would be frozen at 1,300 units and supply restricted to 1,100 units. Sales above this level would be controlled, and the market would be on a downswing. Now, assume that the price of feeders drops by 50%. How would this change impact the demand for feeders? Explain your answer and reconstruct the graph developed in question one to show this change. In case the price for feeders drops by 50%, there would a corresponding change in the demand and supply ratio as given below : As can be seen, the demand for the product would be constant, but the supply would be halved. 1.2 Price/Feeder Quantity Demanded Quantity Supplied Price/Feeder (Dropped by 50%) Quantity Demanded Quantity Supplied Price/Feeder Quantity Demanded Quantity Supplied Price/Feeder (Dropped by 50%) Quantity Demanded Quantity Supplied $300 500 1800 $150 500 900 $300 600 1800 $300 500 1440 270 600 1700 135 600 850 270 720 1700 270 600 1360 240 700 1600 120 700 800 240 840 1600 240 700 1280 210 800 1500 105 800 750 210 960 1500 210 800 1200 180 1000 1400 90 1000 700 180 1200 1400 180 1000 1120 150 1100 1300 75 1100 650 150 1320 1300 150 1100 1040 120 1200 1200 60 1200 600 120 1440 1200 120 1200 960 90 1300 1100 45 1300 550 90 1560 1100 90 1300 880 60 1400 1000 30 1400 500 60 1680 1000 60 1400 800 30 1500 900 15 1500 450 30 1800 900 30 1500 720 10 1600 800 5 1600 400 10 1920 800 10 1600 640 Assume that incomes of the consumers in this market increases. What would happen in this market? Explain your answer and reconstruct the graph developed in question one to show this change. In case the income of the market consumers increases, this would lead to an increased demand for the product, since the price remaining constant, the supply would be fixed. (Refer chart above) In the chart, a 20% increase has been assumed in the demand, considering an increase in the incomes of the market consumers. 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. In case the number of sellers decreases, it would affect the supply of the product, as explained in table 4 above, wherein assuming demand and prices constant, supply has been assumed to be reduced by 20% Explain the difference between a normal good and an inferior good. Would your answers to question 7 change depending on whether this good is a normal or inferior good? Why? A normal good is just what the term states. In other words, normal goods are those which have a standing in the market, are of better or superior quality and have a strong market share. Demand for such goods is huge, and consequently the supply thereof is also in ample quantities. The economy of the market mostly depends on normal goods. Inferior good is just again what the term states. Goods of an inferior quality, which have little or no market share, and are mostly used for hoarding purposes, or to fluctuate the pricing network in the market. People rarely or seldom buy goods of an inferior quality, as opposed to normal goods. Supply thereof is in abundance, but most of the stock is then disposed off at cost or lower than cost, since demand thereagainst is very small in nature. In case the product above was of an inferior nature, the demand and supply thereof would have been wildly fluctuating, since although prices were constant, supply would be in abundance, and demand for the product would be quite low.
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