Business Economics Assignment Solutions

This assignment covers key concepts in business economics, including market equilibrium, demand and supply shifts, and real-world case studies. It features solutions to three case studies (Cases 1, 2, and 3) illustrating the impact of changes in demand and supply on price and quantity. Additionally, it addresses questions about market factors influencing watermelon prices and the effect of increased demand for yoga services. The assignment utilizes figures and diagrams to visually represent economic concepts.

Running head: BUSINESS ECONOMICS
Business Economics
Name of the Student
Name of the University
Author note

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Table of Contents
Answer 3..........................................................................................................................................2
Answer 4..........................................................................................................................................3
Case 1...........................................................................................................................................3
Case 2...........................................................................................................................................4
Case 3...........................................................................................................................................5
References........................................................................................................................................6

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Answer 3
Figure 1: Market for Watermelon in summer
Price and quantity in the market is determined depending on the twin effect of demand and
supply in the market. Different demand and supply influencing factors changes that leads to a
change in change in equilibrium price and quantity. Change in taste and preferences cause a
change in demand reflected from an inward or outward shift of the demand curve. Similarly
supply changes when factor influencing production changes (Mankiw 2014). The situation of the
watermelon market is defined above. Equilibrium price is P* and corresponding quantity in the
market in Q*. During summer people prefers watermelon to any other season. This raises
demand for watermelon. When demand raises then price tend to be increased. However, there is
another factor to consider. The supply condition also changes in summer. Because of favorable

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seasonal effect, harvesting also increases during summer. The demand curve shifts leftward from
DD to D’D’ and supply curve shifts rightward from SS to S’S’. Therefore, in summer there is a
new equilibrium in the market corresponding to which price is lowered to P1 and Quantity
supplied in the market increases to Q1.
Answer 4
An increase in demand for yoga services causes an outward shift of the demand curve. At
the same time when govern regulation leads to a fall in number of yoga providers in the market
then supply curve also shift but in the opposite direction. The ultimate effect on price and
quantity depend on the magnitude of demand and supply change. There can be different market
outcome depending on the demand and supply condition.
Case 1

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Figure 2: Change is supply offsets change in demand
The demand curve here shifts from DD to D1D1. An increase in demand is generally
associated with an increase in both price and quantity demanded in the market. In addition to the
demand, increase there is a decrease in supply as well. This is shown from the shift of supply
curve fro SS to S1S1. There are two opposite forces on in the market. The new equilibrium is
defined as the point obtained from intersection of D1D1 and S1S1. The new price is P1 and the
corresponding quantity is Q1. Price is greater than the previous price and quantity supplied in the
market is less than the previous quantity. This happens when supply change is greater than the
demand change.
Case 2
Figure 3: demand change offsets the supply change

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This is the case opposite to the case mentioned above. In this case, the magnitude of
demand change is greater than that of the supply change. As a consequence the effect of demand
changes dominate. Both price and quantity in the market increases (Chenayah 2017).
Case 3
Figure 4: Equal change in demand and supply
This is a hypothetical case. Here the effect of demand and supply changes is only on the
price. In this case, demand and supply changes in same proportion.

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References
Chenayah, S., 2017. Book Review-Fundamentals of Microeconomics. Institutions and
Economies, pp.149-150.
Mankiw, N.G., 2014. Principles of macroeconomics. Cengage Learning.