Problem Set

The relevance of demand and supply in economics cannot be overstated given that the two are considered some of economics' most fundamental concepts. In this text, I explain both the demand and supply for Anheuser-Busch's products. Further, I identify some of the substitute and/or complementary goods for Anheuser-Busch's products.

Many European countries have offered free university education to encourage qualified students to apply for higher education. Rather than collecting tuition fees from students, these universities are being funded through taxation and charitable organizations. However, the result is not completely what the government has expected. The increasing number of enrollments has made job market very competitive, and many university graduates end up unemployed or underemployed. Moreover, universities are focusing more on the quantity instead of quality of education, which made the value of university degree shrink substantially. Taxpayers complain using the tax payments to subsidize only the students who want to attend universities is not fair, as university education is only one of the many choices for students who graduates from high school and students may have different goals. Currently in Canada, we are having more university graduates than the economy can absorb. If tuition becomes free, more students will be attending universities. However, if the number of jobs created does not match the increase in university graduates, the rising unemployment rate can trigger even more social issues.

There is evidently existence of market failure in education. Extract B, line 1 suggests that universities need more income, and they were finance largely through government

It is a definite tie in to the previous principle as most consumers are looking to get the most for the least. Restaurants are starting to use promotions of smaller portions for smaller prices in order to compete with the growing money saving tight budgeted crowd. Mankiw (2007) provides a great example of this by stating “For example, when the price of an apple rises, people decide to eat more pears and fewer apples because the cost of buying an apple is higher. At the same time, apple orchards decide to hire more workers and harvest more apples because the benefit of selling an apple is also higher. As we will see, the effect of a good’s price on the behavior of buyers and sellers in a market—in this case, the market for apples—is crucial for understanding how the economy allocates scarce resources.” (p. 7)

Other things equal, if wages of young high school graduates decline, the potential alternative use of time spent studying in higher education…namely, working with only a high school education…has relatively less value. Therefore, the opportunity cost of student study time measured in foregone wages is lower. Assuming no change in the explicit costs of higher education (tuition, fees& books), the opportunity cost decline has reduced the overall cost of higher education.

Hypothetically, the ideal price that results in producer and consumer attaining the greatest level of shared benefit arises at the price where the supply and demand lines intersect. Deviations from this fact results in a

The strongest claim the author made was that the economy and education are highly intertwined. It is stated that without a public access to a higher level of education, the income equality will grow larger and our country of democracy and prosperity will be in jeopardy. The

We are given the growth rate, but need to calculate the dividend amount and the cost

It is true that colleges need to sell their school to incoming students in order to have students attend their school. However, this shows that this comparison is a false analogy since colleges promote their schools differently than manufacturers promote

1. The law of downward sloping demand generally states that the higher a product is priced, the lower the demand will be. The lower a product is priced, the higher the demand (Samuelson & Marks, 2012). The increase in education prices and demand for them definitely does contradict the law of downward sloping demand. The abundance of student loans and the large amounts of money they provide has made the law of downward sloping demand irrelevant when it comes to education. Students are able to get just about however much money they want to attend college. The higher education institutions have realized this and take advantage, knowing that the student does not need to have the cash in hand (Sullivan, 2015). The students do not feel the

In other words most people would prefer to pay more and buy a more expensive product thinking that by paying more it is also superior to the other products of the same category that are cheaper. However, although the phrase “you get what you pay for” might have some validity in it that is not always the case, due to the fact that sometimes the products that might be cheaper are just as good as the competitor brand which has a higher price. In this instant it would be logical to buy the cheaper product however most human beings would opt for the expensive product, assuming that it is of better quality than the cheaper product. On the other hand, Dan Ariely rebuffs this claim and states, “We choose what we like, not what's best.” Sometimes humans don’t make decisions based on their preferences; instead they choose what they want and that leads to a process of rationalisation in order to get what they really want. However, they still want to give the impression that they were acting according to their preferences.

Understanding the fundamental concepts of economics allows us to analyze laws that have a direct bearing on the economy. These laws and theories are essentially the backbone of how economics is used and studied. The law of demand can be expressed by stating that as long as all other factors remain constant, as prices rise, the quantity of demand for that product falls. Conversely, as the price falls, the quantity of demand for that product rises (Colander, 2006, p 91). Price is the tool used that controls how much consumers want based on how much they demand. At any given price a certain quantity of a product is demanded by consumers. As the price decreases, the quantity of the products demanded will increase. This indicates that more individuals demand the good or service as the price is lowered. This can be illustrated using the demand curve. The demand curve is a downward sloping line that illustrates the inversely related relationship of price and quantity demanded.

The greater the demand of a product, the greater the associated value, and hence greater will be price. Price is also dependent upon the supply of a product, the lower the supply, the higher the price. The price of a product is also dependent upon the state of the overall economic conditions. At the time of the recent recession, the ticket prices of matches and merchandise were set at a comparatively lower level than at the time of a boom. (Kotler)

This type of relationship can be explained by the law of demand which states that as price of a good increase or decreases, the quality demanded of that good falls or rises all other things being equal.

Quite often, consumers purchase goods and services based on their perceived need. Upon making the decision that a need is present and a solution is available consumers are more equipped to react to that need. Although previously perceived that consumers will normally accept prices as presented by suppliers that remains to not be the case. Consumers assess and process prices based on past purchases and other psychological process they went through previously such as persuasive marketing strategies, accessibility of the goods or services and possibly information gathered from prior purchasers of a product. There are countless options that are available to consumers. Consumers are then faced with the choice of choosing the product that best fulfills their need at that given point. Consumers who are knowledgeable regarding prices will be aware of the approximated price for products (Zhao, Zhao & Deng, 2015).