Question: For the scenarios discussed below, use supply and demand curves and a graph to analyze what will happen to both price and quantity in equilibrium given the information available below. Graphs must be half a page each, please. When it is impossible to pin down the direction of the effect, discuss what is more likely in your opinion and why.
a. You are the CEO of Walmart. Your economists inform you that they predict a recession starting next year. Analyze what you expect what will happen to the price and quantity of a typical good sold at your stores. Distinguish between stores by the demography of the neighborhood they are in.
b. You are the CEO of General Motors. Your economists inform you that the price of plastic is predicted to go down 20% next year, but the wages you pay are expected to go up 10%. Please assume that the price of plastic accounts for 5% of total manufacturing cost of a car, and that wages account for 30% of total manufacturing costs.