As an economist for ABC Plastics, your boss has asked you to respond to some questions she has regarding the company's main product, tablet cases. A marketing research firm recently developed the following supply and demand schedules for tablet cases:
Price/Case Quantity Demanded Quantity Supplied
$24 5000 18000
22 6000 17000
20 7000 16000
18 8000 15000
16 10000 14000
14 11000 13000
12 12000 12000
10 13000 11000
8 14000 10000
6 15000 9000
4 16000 8000
2 17000 7000
You are to develop a report addressing the following questions and present your findings to the Board of Directors:
Questions:
1. Construct a graph showing supply and demand in the tablet case market, using Microsoft Excel.
2. How are the laws of supply and demand illustrated in this graph? Explain your answers.
3. What is the equilibrium price and quantity in this market?
4. Assume that the government imposes a price floor of $16 in the tablet case market. What would happen in this market?
5. Assume that the price floor is removed and a price ceiling is imposed at $8. What would happen in this market?
6. Now assume that the price of tablet cases drops by 50%. How would this change impact the demand for tablet cases? Explain your answer and reconstruct the graph developed in question one to show this change.
7. Assume that incomes of the consumers in this market increase. What would happen in this market? Explain your answer and reconstruct the graph developed in question one to show this change.
8. Assume that the number of sellers decreases in this market. What would happen in this market? Explain your answer and reconstruct the graph developed in question one to show this change.
9. Explain the difference between a normal good and an inferior good. Would your answers to question #7 change, depending on whether this good is a normal or inferior good? Why or why not?