IIBT Economics 101: Analyzing Supply and Demand Factors & Shifts

This economics assignment delves into the principles of supply and demand, differentiating between changes in quantity demanded/supplied and shifts in the demand/supply curves. It analyzes the impact of various factors on the demand curve for apples, including changes in own price, consumer income, and the price of related goods like oranges. The assignment also examines factors affecting the supply curve for apples, such as wages of fruit pickers, technological improvements, and the number of apple growers. Furthermore, it discusses the impact of promotional campaigns on market equilibrium, and analyzes the effects of price changes and other factors on movie ticket demand. The document also defines key economic concepts such as complementary goods, substitution effect, and income effect. Desklib provides this solved assignment and many other resources for students.

Running head: ECONOMICS
Economics
Name of the Student
Name of the University
Course ID

1ECONOMICS
Table of Contents
Question 1........................................................................................................................................2
Changes in quantity demand and changes in demand.................................................................2
Question 2........................................................................................................................................5
Changes in quantity supplied and changes in supply..................................................................5
Question 3........................................................................................................................................7
Question 4........................................................................................................................................8
References......................................................................................................................................11

2ECONOMICS
Question 1
Changes in quantity demand and changes in demand
` Changes in quantity demand indicate changes in the purchased quantity due to a change n
own price of the product. In such case, there occurs a movement along the demand curve. In
contrast changes in demand, refers to increase or decrease in demand due to change in factors
other than price (Cowell 2018). Following a change in demand, there occurs a rightward or
leftward shift of the demand curve.
a)
Figure 1: Effect of a fall in own price of apples
A fall in own price people induces people to purchase more apple increasing the quantity
demand of apple. Following this there is a downward movement along the demand curve from
point A to B as shown in the above figure.

3ECONOMICS
b)
Figure 2: Effect of an increase in consumer income
An increase in consumer income allows people to buy more apple. This increases demand
for apple shifting the demand curve to the right (Baumol and Blinder 2015).
c)
Figure 3: Effect of a rise in price of oranges

4ECONOMICS
Apple and orange are substitute goods. As price of orange increases, people buy less
orange and more apple. This increases demand for apple shifting the demand curve of apple to
the right.
d)
Figure 4: Effect of a fall in price of oranges
As price of orange falls, people by more orange and less apple. This reduce demand of
apple shifting the demand curve inward.
e)
A complementary good refers to the good that is used in conjunction with another good
or service. Such a good has little or no value in the absence of its complements (Cowen and
Tabarrok 2015). One example of complementary good is hot dog and hot dog buns.

5ECONOMICS
Question 2
Changes in quantity supplied and changes in supply
Changes in quantity supply indicate changes in the supplied quantity due to a change in
own price of the product. For a change in quantity supplied, there occurs a movement along the
supply curve. In contrast changes in supply refers to increase or decrease in supply due to change
in factors other than price (Nechyba 2016). Following a change in supply, there occurs a
rightward or leftward shift of the supply curve.
a)
Figure 5: Fall in wages earned by fruit pickers
A fall in wages of fruit pickers lowers the cost of fruit picks. This increases supply of
apple shifting supply curve of apple to the right.

6ECONOMICS
b)
Figure 6: Effect of an improvement of fruit picking technology
Improvement in technology of fruit picking equipment increases supply of apply and
shifts the supply curve outward (Mochrie 2015).
c)
Figure 7: Effect of a rise in own price
An increase in own price encourage apple growers to supply more apples. This shifts the
supply curve of apple to the right.

7ECONOMICS
d)
Figure 8: Effect of an increase in number of apple growers
As the number of apple growers’ increases, more apples will be supplied in the market.
This shifts the supply curve of apple to the right.
e)
‘Substitution effect’ is an economic concept that indicates as price of a good increases,
people replace the relatively expensive items with the relatively cheaper alternatives.
Question 3
Figure 9: Effect of undertaking promotional campaign

8ECONOMICS
In the above figure, the demand and supply of apple is shown as DD and SS respectively.
The industry initially in equilibrium at point E. In the market, equilibrium price and quantity of
apple are P* and Q* respectively. If the industry undertakes ‘eat an apple and live a healthy life’,
this will encourage people to buy more apple to enjoy a healthy life. As people start to buy more
apple demand of apple increases resulting in a rightward shift of the demand curve to D1D1. With
expansion of demand, equilibrium shits from E to E1 (Arrow 2015). At the new equilibrium point,
equilibrium price increases from P* to P1 and equilibrium quantity in the market increases from
Q* to Q1. Therefore, because of the advertisement both price and quantity sold of apple
increasing revenue of apple growers. This in turns help them to overcome the higher cost of
water.
Question 4
a)
Figure 10: Effect of reduction in price of movie tickets

9ECONOMICS
A reduction in price of movie tickets from $11.50 to $6.50 attracts more people to watch
movie in the movie hall. This increase movie attendance increasing the quantity demanded of
movie ticket. Consequently, there is downward movement along the demand curve.
b)
Figure 11: Effect of an increase in consumer income
An increase in consumer income allows people to afford more movie. This increases
movie attendance shifting the demand curve to the outward to D1D1.
c)

10ECONOMICS
Figure 12: Effect of decrease in price of popcorn and confectionary
Popcorn and confectionary are complementary to movie tickets. Therefore, a decrease in
price of popcorn and confectionary increases movie attendance (Kolmar 2017). As movie
attendance increases, the demand curve of movie attendance shifts to the right.
d)

11ECONOMICS
Figure 13: Effect of a fall in ‘internet-subscription films’
Internet subscription films are alternative to the watch movie in the hall. As the price of
internet subscription films falls, people are more willing to watch movie on internet instead of
going to movie hall to watch a movie. This reduces movie attendance shifting the demand curve
of movie attendance to the left.
e)
In microeconomics, income effect refers to the change in demand of a particular good
and service due to change in purchasing power of consumer following a change in real income
(Jain and Ohri 2015).
References
Arrow, K., 2015. Microeconomics and operations research: Their interactions and
differences. Information Systems Frontiers, 17(1), pp.3-9.
Baumol, W.J. and Blinder, A.S., 2015. Microeconomics: Principles and policy. Nelson
Education.
Cowell, F., 2018. Microeconomics: principles and analysis. Oxford University Press.
Cowen, T. and Tabarrok, A., 2015. Modern principles of microeconomics. Macmillan
International Higher Education.
Jain, T.R. and Ohri, V.K., 2015. Principal of Microeconomics. FK Publications.
Kolmar, M., 2017. Principles of Microeconomics. Springer International Publishing.
Mochrie, R., 2015. Intermediate microeconomics. Macmillan International Higher Education.

12ECONOMICS
Nechyba, T., 2016. Microeconomics: an intuitive approach with calculus. Nelson Education.