Essay about Week 3 Assignment

1671 Words Mar 15th, 2012 7 Pages
BUSN 5260
Current Economic Analysis
Week 3: Personal Assignment
Some students have difficulty understanding the laws of supply and demand and the difference between changes in demand (supply), which are caused by changes in the respective determinates of demand or supply, and changes in quantity demanded (supplied) which result from changes in the price of the good or the service.

Before you complete this assignment, I suggest that you again review Chapter 3 and my lecture material provided this week. There are some basic principles which must be followed when constructing supply and demand graphs, for example, price is always on the vertical axis and output (quantity) on the horizontal axis.

I also strongly suggest that you
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Provided of course that we’re assuming these are “gas guzzler” SUV’s and not hybrid SUV’s or another type of highly fuel efficient SUV. Though the equilibrium price would drop and sales would probably decrease slightly at first, supply would likely remain the same over the long term as I imagine manufacturers would look into making the SUV’s more fuel efficient to compete with other cars rather than cut production on those vehicles. I believe this principle would work in reality and I actually think we’ve seen something along those lines over the past few years. As gas prices have risen, SUV’s have gotten smaller and more fuel efficient. Too boot, sales and production on smaller SUV’s like the Honda CRV have remained steady.

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Show the effect of setting the price of Super Bowl tickets at a price lower than equilibrium price.

SEE EXCEL DOCUMENT FOR DIAGRAM

In this case the equilibrium price for Super Bowl tickets is around $7,500 per ticket. This would seemingly work out well as the demand at this price would be around 70,000 tickets (or about as many seats contained in a large football stadium). If however, the seats prices are set too low, at an average price of about $1,250 per ticket, the demand would well exceed the capabilities of the stadium. This would mean a significant loss of

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