BUS102 Economics Assignment: Supply, Demand, and Pricing Strategies

This economics assignment, part of the BUS102 course, analyzes the economics of globalization through responses to articles. The assignment covers key concepts such as supply and demand, illustrated with diagrams to show how changes in demand affect price, as seen in the case of electricity pricing at night. It also examines how supply shortages, like those affecting prawn markets, influence prices. The assignment further explores the concept of surge pricing and its effectiveness, emphasizing the role of demand elasticity. Finally, it compares elastic and inelastic demand curves, demonstrating how price increases impact quantity demanded differently. References from economic literature are included to support the analysis.

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

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ECONOMICS OF GLOBALIZATION
Table of Contents
Answer 1....................................................................................................................................2
Answer 2....................................................................................................................................3
Answer 3....................................................................................................................................3
Answer 4....................................................................................................................................4
References..................................................................................................................................6

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Price
S
D1
D2
Q*Q1
P*
P1
Quantity
ECONOMICS OF GLOBALIZATION
Answer 1
Figure 1: Decrease in demand of electricity at night
Source: (created by author)
According to the given scenario, electricity becomes cheaper at night and for this
udders need to pay comparatively less amount during this time. Economy 7 tariff charges less
during this time as the demand for electricity remains low (Cowell 2018). The above diagram
represents this situation by changing the demand curve from D1 to D2. The supply curve
remains unchanged at S. Therefore, the price of electricity decreases from P* to P1 due to this
decrease in demand.

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Price
S2
D
Q*Q2
P*
P2
Quantity
S1
ECONOMICS OF GLOBALIZATION
Answer 2
Figure 2: Decrease in supply of prawns
Source: (created by author)
The given article mentions that prices of fresh goods such as fish vary based on the
availability of it in market. In this context, prawns market can experience a shortage of
supply while demand remains same as before (Parkin and Bade 2015). As a result, the supply
curve shifts upward from S1 to S2 though the demand curve remains at D. In this situation,
price of prawns increases from P* to P2 while the quantity of prawns available in market
decreases from Q* to Q2.
Answer 3
The concept “surge pricing” represents adjustment of prices based on the changing
demand and supply of a product. When demand for a product exceeds supply of it, producers
increase price. This is because an increase in price can tend many customers to demand less

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P P
Q Q
Relatively inelastic Relatively elastic
P1
P0
Q1 Q0 Q1 Q0
D1
D2
ECONOMICS OF GLOBALIZATION
and this in turn reduces the excess demand for this product significantly (Zha, Yin and Du
2017). However, surge pricing cannot influence demand equally for each good, as depends
chiefly on demand elasticity of the product. If demand for a product becomes elastic then
change in price can influence excess demand drastically and in this context surge pricing can
be more effective. However, the opposite can occur if the demand for a product becomes
comparatively less elastic.
Answer 4
Figure 3: Impact of increase in price on elastic and inelastic demand curves
Source: (created by author)
Figure 3 represents both relatively inelastic and elastic demand curves, which are , D1
and D2, respectively. In both situations, price increases from P0 to P1 and consequently
demand decreases from Q0 to Q1. However, the amount of decrease in demand is not same in

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ECONOMICS OF GLOBALIZATION
both situations (Gostkowski 2018). In case of relatively inelastic demand curve, quantity
demanded changes by fewer amounts compare to elastic demand curve.

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ECONOMICS OF GLOBALIZATION
References
Cowell, F., 2018. Microeconomics: principles and analysis. Oxford University Press.
Gostkowski, M., 2018. Elasticity of Consumer Demand: Estimation Using a Quadratic
Almost Ideal Demand System. Econometrics, 22(1), pp.68-78.
Parkin, M. and Bade, R., 2015. Introduction to Microeconomics.
Zha, L., Yin, Y. and Du, Y., 2017. Surge pricing and labor supply in the ride-sourcing
market. Transportation Research Procedia, 23, pp.2-21.