Economics Assignment: Analyzing Market Equilibrium and Demand Shifts

This economics assignment delves into the principles of supply and demand, analyzing how various factors influence market equilibrium. The assignment examines scenarios such as changes in the number of ice cream producers, fluctuations in the price of frozen yogurt, wage increases affecting input costs, and the impact of complementary goods like toppings on ice cream demand. Through graphical representations, the assignment illustrates shifts in supply and demand curves, demonstrating the resulting changes in market equilibrium price and quantity. Furthermore, it explores the effects of simultaneous shifts in both supply and demand, using examples like the chocolate market, the U.S. milk market, and the auto gasoline market in British Columbia. Finally, the assignment applies the law of demand to the champagne industry, considering the influence of substitute product prices on demand.

Running head: ECONOMICS ASSIGNMENT
Economics Assignment
Name of the student
Name of the university
Author Note

1ECONOMICS ASSIGNMENT
Table of Contents
1..................................................................................................................................................3
a..............................................................................................................................................3
b..............................................................................................................................................3
c..............................................................................................................................................4
d..............................................................................................................................................5
2..................................................................................................................................................7
a..............................................................................................................................................7
b..............................................................................................................................................8
c..............................................................................................................................................9
3)..............................................................................................................................................10
References:...............................................................................................................................11

2ECONOMICS ASSIGNMENT
Price
Supply of ice cream
O
S0
S1
1.
a.
Due to increasing number of ice-cream producers, market supply increases and
consequently this curve shifts to the right.
Figure 1: Increase in supply
Source: (created by author)
The supply curve of ice cream has shifted from S0 to S1 to represent increase in supply.
b.
As the price of frozen yoghurt decreases, demand for ice cream can decrease as well.
This is because yoghurt and ice cream are substitute and for this demand curve can shift to
the left.

3ECONOMICS ASSIGNMENT
Price
Demand for ice cream
O
D0
D1
Price
Supply of ice cream
O
S1
S0
Figure 2: Decrease in demand
Source: (created by author)
The demand curve for ice cream decreases and shifts towards left from D0 to D1.
c.
Due to a wage increase, input cost increases for which producers try to supply less
amount of ice cream because of decreasing amount of profit.

4ECONOMICS ASSIGNMENT
Price
Demand for ice cream
O
D1
D0
Figure 3: Decrease in supply
Source: (created by author)
As wage increases, supply of ice cream decreases from S0 to S1.
d.
The mentioned toppings and ice cream are complementary, for which decrease in
price of toppings can increase demand for ice creams.
Figure 4: Increase in demand
Source: (created by author)

5ECONOMICS ASSIGNMENT
Price
Demand for ice cream
O
D1
D0
S0
S1
P1
P0
Q1 Q0
2.
a.
Figure 5: Increasing demand and decreasing supply of chocolate
Source: (created by author)
i) Market equilibrium Quantity decreases from Q0 to Q1
ii) Market equilibrium Price increases from P0 to P1

6ECONOMICS ASSIGNMENT
Price
Demand for ice cream
O
D0
D1
S0
S1
P0
Q1
Q0
Q0
b.
Figure 6: Decrease in both demand and supply of milk in the U.S
Source: (created by author)
i) Market equilibrium quantity decreases from Q0 to Q1
ii) Market equilibrium price remains same at P0

7ECONOMICS ASSIGNMENT
Price
Demand for ice cream
O
D0
D1
S1
S0
P1
P0
Q1Q0
c.
Figure 7: Decrease in demand and increase in supply in Auto gasoline market in BC
Source: (created by author)
i) Market equilibrium quantity increases from Q0 to Q1
ii) Market equilibrium price decreases from P0 to P1

8ECONOMICS ASSIGNMENT
Price
Demand for ice cream
O
D1
D0
P0
Q0 Q1
P1
Q2
3)
According to law of demand, quantity demand for a product decreases when its own
price increases and this can be seen in champagne industry. However, price of its substitute
product can increases as well for which demand for champagne can remain same.
Figure 8: Change in demand and price for champagne
Source: (created by author)