As an economist for ABC Plastics, your boss has asked you to respond to some questions she has...

Question

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:

Construct a graph showing supply and demand in the tablet case market, using Microsoft Excel.

How are the laws of supply and demand illustrated in this graph? Explain your answers.

What is the equilibrium price and quantity in this market?

Assume that the government imposes a price floor of $16 in the tablet case market. What would happen in this market?

Assume that the price floor is removed and a price ceiling is imposed at $8. What would happen in this market?

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.

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.

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.

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?

Komalavalli · Accepted Answer

Q1:
Graph A:
Above graph illustrates the demand and supply for tablet case market with x axis market quantity of tablet case and y axis has price value in dollar ,red line (upward sloping curve) indicates Quantity supply and blue line(downward sloping) indicates Quantity demand for tablet case.
Q2:
The law of supply indicates the price is positively related to quantity of supply. Graph A proves the law of supply exist because as price increases the quantity supply for tablet also increases. Therefore supply curve for tablet market is upward sloping curve.
Law of demand indicates there is negative relationship between price and quantity demand for a product .Graph A also proves there is an existence of negative correlation between price and quantity supply of tablet case. Therefore demand curve for tablet market is downward sloping curve.
Q3:
Equilibrium price is defined as a point where demand curve meets supply curve. From above graph we can say that point E represents the equilibrium with price $12 and quantity of tablet case is 12000.
Q4:
Graph: Price Floor
Price floor of $16 leads to create demand shortage, let us see how these shortages of demand for tablet case exist with the help of above graph. People will demand less when price increases, so in this scenario when government introduces price floor which is higher than equilibrium price of $12, the market demand for tablet case at $16 is 10,000 tablet cases. Firm will supply more when price increases, in the scenario when government introduces price floor which is higher than equilibrium price of $12,

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...

Answer To: As an economist for ABC Plastics, your boss has asked you to respond to some questions she has...

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