Microeconomics

This document discusses the concepts of microeconomics and its impact on the entertainment and food sectors. It provides answers to exercises related to the equilibrium point, supply and demand curves, and the effects of policies on the market. The document also explores the relationship between unhealthy and healthy food markets.

Running head: MICROECONOMICS
Microeconomics
Name of the Student
Name of the University
Author Note

MICROECONOMICS
Table of Contents
Answer to exercise 1:.................................................................................................................2
Answer to exercise 2:.................................................................................................................4
Requirement A)..........................................................................................................................4
Requirement B)..........................................................................................................................6
References list:...........................................................................................................................9

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Answer to exercise 1:
The new program launched for discovering talents would help in enabling and
discovering the best talent in several fields of entertainment. Demand for such national talent
program in the entertainment field would be primarily driven by connectivity and
interactivity. The policy for discovering national talent is creating demand of developing the
talent of population of Kingdom (saudigazette.com.sa, 2019). Hence, it can be said that the
demand is generated by the General entertainment authority of Riyadh. Supply on other hand
is generated by the application from all the segments of society who is interested in taking
part in local entertainment content.
The initial situation and the equilibrium point of the entertainment sector can be
illustrated with the help of following graph.
Entertainment market:
(Source: created by author)
De
De Se
Se
EeP
Q
Dd

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The above graph depicts the initial equilibrium point Ee of the market which is
determined by the interaction of initial demand curves DeDe and supply curve SeSe. At this
level of equilibrium, demand created stood and that of talent supplied stood at Q. The market
of entertainment sector is in equilibrium with quantity supplied equivalent to quantity
demanded (Singleton et al., 2018).
Now, it is required to determine the impact on equilibrium with the introduction of
new policy by the entertainment authority. With the introduction of new program, there is an
increase in application that has led to an increase in overall supply (Lovasi et al., 2018). This
increase in supply would create a rightward shift in the supply curve at the given level of
demand. Once the supply curve shifts, it is required to analyze the change in equilibrium
position. An increase in supply would shift the supply curve to rightward side to S1S1. This
increase in supply given the demand would create new equilibrium point at E1. This
downward shift in supply curve increase the quantity demanded to Q1 and results a fall in
price to P1. The scenario can be explained with the help of following graph:

De
De
Se
Se
Ee
QDd
P
S1
S1
E1
P1
Q1
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Impact of policy on entertainment sector:
(Source: created by author)
From the above graph, it can be seen that with rightward shift in supply cure, and
demand curve remaining unchanged, a new equilibrium has been established. Therefore, it
can be inferred that the introduction of policy has led to increase in the supply and this
increased supply has ultimate impact on the quantity demanded and price.
Answer to exercise 2:
Requirement A)
In this exercise, it is required to incentivize the demand or supply curve so that there
is a shift in equilibrium point. Below graph demonstrate the market for unhealthy food where
D is the demand curve and S is the supply cure and equilibrium is determined at Eo. For

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shifting the equilibrium point leftward, it is required to reduce the supply by the firm.
Reduction in supply can be done by the introduction of supply side policy where government
is asking firms to use certain type of technology in their production process (Mai &
Hoffmann, 2015). Such technological advancement intends to be adopted by firm for
maintaining the quality of goods produced.
It is certainly possible that some of the firms in the market might not afford to employ
such technology in their production process. The technology to be employed might be costly
firms who cannot afford to employ such technology would find it difficult to go with the
trend in technological innovation. Employment of such technology would increase the cost of
production and ultimately lower the profits generated (Haslam et al., 2018). Reduction in
profit level would make it difficult for firms to sustain in the industry. Hence, such firms
would leave the market lowering the overall supply. It can also happen that the government
would cancel the license of firms who fail to catch on with the technological advancement
forcing the firms to leave the industry.
The policy of employing new technology in the production process and failure on part
of firms to go with such technological innovation would result in lowering the overall supply
(Soderbery, 2015). This reduction of supply would shift the supply curve S to S1. Initially, the
equilibrium is determined at E0 with quantity demanded and supplied at Q0 and price of the
food at P0.

E0
S
D
P
Q
E1
S1
P0
P1
Q0Q1
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Market for unhealthy food:
(Source: created by author)
Now, reduction in the quantity supplied has resulted in leftward shifting of supply
curve from S to S1. Leftward shift in the supply curve has resulted in lowering the quantity
demanded from Q0 to Q1 and an increase in price from P0 to P1. Therefore, the policy has led to
incentivizing the supply curve and the market for unhealthy food has experienced a reduction
in demand and increase in price.
Requirement B)
The market for healthy food is affected by the market for unhealthy food as they both
are considered substitute foods. An increase in price of unhealthy food would cause an
increase in demand for healthy foods. It would be so because reduction in supply of

E0
S
D
P
Q
P1
Q0
D1
E1
Q1
P0
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unhealthy food is pushing up their price and the price might be equal to the price of healthy
food. This would result an increase in demand of healthy food because of increase in either
health consciousness or lower price compared to unhealthy food (Bonitsis & Brown, 2019).
Therefore, decrease in supply of unhealthy food would lead to increase in demand of healthy
food.
. Market for healthy food:
(Source: created by author)
From the above graph, it can be seen that an increase in demand for healthy food has
resulted in rightward shift of demand curve from D to D1 and a new equilibrium is determined
at E1. The new quantity demanded of healthy food and new price is determined at Q1 and P1
respectively. Therefore, the introduction of the policy of employing technology in the

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production process for unhealthy food has shifted the equilibrium point of healthy food
market (Lenk et al., 2018). At this new equilibrium level, both the quantity and price has
increased.

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References list:
Bonitsis, T. H., & Brown, R. C. (Eds.). (2019). Quantity and Quality in Economic Research:
Studies in Applied Business Research (Vol. 4). Routledge.
GEA chief launches program to discover local talents. (2019). Saudigazette. Retrieved 14
February 2019, from http://www.saudigazette.com.sa/article/558686/SAUDI-
ARABIA/GEA-chief-launches-program-to-discover-local-talents
Haslam, C., Jetten, J., Cruwys, T., Dingle, G., & Haslam, A. (2018). Eating behaviour. In The
New Psychology of Health(pp. 223-246). Routledge.
Lenk, K. M., Caspi, C. E., Harnack, L., & Laska, M. N. (2018). Customer characteristics and
shopping patterns associated with healthy and unhealthy purchases at small and non-
traditional food stores. Journal of community health, 43(1), 70-78.
Lovasi, G. S., Rundle, A., Bader, M. D., & Neckerman, K. M. (2018). Case Study 1 Healthy
and Unhealthy Food Sources in New York City. Population Health, 12.
Mai, R., & Hoffmann, S. (2015). How to combat the unhealthy= tasty intuition: The
influencing role of health consciousness. Journal of Public Policy &
Marketing, 34(1), 63-83.
Singh, S., Khurana, D., & Tayal, S. (2016). An economic order quantity model for
deteriorating products having stock dependent demand with trade credit period and
preservation technology. Uncertain Supply Chain Management, 4(1), 29-42.
Singleton, C. R., Li, Y., Odoms-Young, A., Zenk, S. N., & Powell, L. M. (2018). Change in
Food and Beverage Availability and Marketing Following the Introduction of a
Healthy Food Financing Initiative–Supported Supermarket. American Journal of
Health Promotion, 0890117118801744.

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Soderbery, A. (2015). Estimating import supply and demand elasticities: Analysis and
implications. Journal of International Economics, 96(1), 1-17.