In economics, they say a picture is worth a thousand words. Below, you will find two scenarios. Your assignment is to discuss the situation by writing the solutions, and then show the solutions and how you got here in one or more
graphs or flowcharts.
Supply and demand are foundational concepts in understanding economic theory.
Whether you are a coffee drinker or not, you have been tasked to examine the impact of supply and demand when dealing with the coffee retail industry.
A few companies probably come to mind. Pick a major coffee retailer and the contemplate what has been happening to both the supply and demand for this product.
To begin, the following scenario deals with what happened in the coffee
industry at the beginning of last decade:
In the early part of the last decade, there was an overproduction of coffee.
The price dropped so low that producers’ costs were higher than the market
price. The reason this happened was that market prices became high before this,
and the supply of coffee increased substantially. In the meantime, demand for
coffee and everything else remained the same.
Coffee prices, as a supply input, went down. In the meantime, gourmet coffee houses began appearing, which began charging a premium for coffee in the period of decreasing prices.
Gourmet coffee houses tend to open in high-rent areas and cater to higher income consumers. Because of the change they created for taste and preferences and the higher income market, the gourmet coffee houses had a win-win in a
period of falling wholesale prices and increasing retail prices.
Explain the changes in the supply and demand creating a supply and demand
curve based on the above information. In this graph, be sure to demonstrate how
these changes affected the price and quantity levels of supply and demand.
Based on this analysis, how were coffee retailers faring in the marketplace?
Now, fast forward to the current conditions in the coffee retail industry.
Based on your research of your coffee retailer, what types of changes are occurring as they relate to supply and demand?
In this next scenario, start your discussion by examining the differences between the definitions of the macroeconomics and microeconomics? Next, discuss how the concepts of supply and demand relate to (1) microeconomics and (2) macroeconomics.
In order for you demonstrate understanding of the supply and demand, from the perspective of a microeconomic vs. macroeconomic, pick three of the ten scenarios below and discuss the following:
Is the scenario a macroeconomic or microeconomic example of supply and demand
Is this impacting supply or demand?
Is this example going to experience a shift or a movement of supply or demand?
As a result of this change, what happened to equilibrium price and quantity?
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