ECO2401 Unit 2 Essay – focuses on demand, supply, and equilibrium

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ECO 2401, Principles of Macroeconomics 2

Unit Assignments

Unit II Essay

This assignment focuses on demand, supply, and equilibrium. Let’s start with the basics. Begin your essay by providing the following information.

Explain the difference between a movement along demand and supply curves and a shift of demand and supply curves. What can cause the above situations? Provide an example for each. Describe how equilibrium is found. Describe how a shift of the demand or supply curve can affect equilibrium.

Now, select an industry with which you are familiar or one you would like to study. This industry will also be used in future assignments for this course.

After selecting your industry, identify a product or service that your chosen industry produces. Add the following information.

Define the current status of supply and demand for the product or service you identified. Identify at least one factor that has caused the supply curve to shift for that product or service. Identify at least one factor that has caused the demand curve to shift for that product or service.

Your essay must be a minimum of two pages, not counting the reference page. Be sure to include an introduction. Use a minimum of three peer-reviewed scholarly sources; at least one of these must come from the Waldorf Online Library. Information regarding peer-reviewed articles can be found in the tutorial Peer-Reviewed Articles.

All sources used, including the textbook, must be referenced. Adhere to APA Style when creating citations and references for this assignment. APA formatting, however, is not necessary.

For information concerning what an introduction is and includes, view the brief tutorial Introductions and Conclusions.

Solution

Difference between movement along demand and supply curves and a shift of demand and supply curves:

Movement along demand and supply curves refer to changes in quantity demanded or supplied due to a change in price. This occurs when there is a change in the price of a good or service, causing a shift along the existing demand or supply curve. Movement along the curve does not change the demand or supply curve’s position.

On the other hand, a shift of demand and supply curves refers to changes in the demand or supply curve’s position, resulting from factors other than the price. A shift of the curve indicates a change in the quantity demanded or supplied at every given price. These shifts occur due to factors such as changes in consumer preferences, income, population, or technology.

Example of movement along demand and supply curves:

Suppose the price of apples increases from $1 to $2 per pound, causing the quantity of apples demanded to decrease from 100 pounds to 50 pounds. This change is a movement along the demand curve, which shows the relationship between the price of apples and the quantity demanded. However, the demand curve’s position remains the same.

Example of a shift of demand and supply curves:

Suppose there is an outbreak of a new disease that primarily affects orange trees, causing a significant reduction in the number of oranges produced. As a result, the supply of oranges decreases, causing the supply curve to shift to the left. This shift means that, at every given price, there is a lower quantity of oranges supplied. The new equilibrium price will be higher than the previous equilibrium price.

Equilibrium:

Equilibrium is the point where the quantity demanded equals the quantity supplied. It is where the supply and demand curves intersect, and there is no pressure for the price or quantity to change. At this point, the market is said to be in equilibrium, and the price is the equilibrium price.

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Effects of shifts in demand and supply curves on equilibrium:

When there is a shift in either the demand or supply curve, the equilibrium price and quantity change. An increase in demand or supply shifts the curve to the right, leading to a higher equilibrium quantity and price. Conversely, a decrease in demand or supply shifts the curve to the left, leading to a lower equilibrium quantity and price.

Selected Industry: Technology

Product/Service: Smartphones

Current status of supply and demand:

The demand for smartphones is currently high due to the increasing reliance on technology. Simultaneously, the supply of smartphones has been affected by a shortage of microchips, resulting from the COVID-19 pandemic’s impact on global supply chains.

Factors causing a shift in the supply curve:

The shortage of microchips has caused a shift in the supply curve for smartphones. The supply curve has shifted to the left, causing a decrease in the quantity of smartphones supplied at every given price.

Factors causing a shift in the demand curve:

The demand curve for smartphones has been affected by factors such as consumer preferences, income, and technological advancements. For example, the increasing trend of remote work and online learning has led to a higher demand for smartphones with larger screens, better camera quality, and longer battery life.

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