Economics 201 Section 01Matthew HensleyENCS 201 section 01Examination 21a. The dry weather in Brazil, where the Arabica coffee beans grow, causes an exogenous shock to the supply side of the beans. The shortage of Arabica coffee beans causes an increase in the market price. As market price increases, consumers decrease their rate of consumption (decrease in quantity demanded) and producers decrease the rate of production (a reduction in quantity supplied) which results in a decrease in equilibrium quantity and an increase in equilibrium price.1b. Because the price of the Arabica beans increased, it causes an exogenous shock to the demand side of the Robusta coffee beans, a substitute. Because the price of a substitute increases, the demand for Robusta beans increases which will lead to a shortage and thus an increase in market price. As the market price rises, consumers reduce their rate of consumption (a decrease in quantity demanded) along the new demand curve and producers increase the rate of production (an increase in quantity supplied) which results in an increase of both equilibrium price and quantity.
2. First of all demand and quantity demanded are two separate terms. Demand is the entire downward sloping line on a Price vs. Quantity graph, while quantity demanded is a single point on the graph. If a seller of a good X has 100 customers a day and then increases the price of good X and only gets 20 customers a day, the demand for good X didnt decrease, the quantity demanded of good X decreased because 80 of the customers no longer found good X to be worth the new price. Demand would only change if the customers were persuaded by something other than price. For example if a new study found that good X can increase the users lifespan, it would cause an increase in the demand for good X. In order for the seller to get back to 100 customers a day (increase the quantity demanded) he has to lower the price back to where is was because the lower price is what the other 80 customers are willing to pay.
4. Demand and quantity demanded are different on each graph, and in this case are the same. The graph is very similar in magnitude to the table above. Also, demand and price can be related. Demand can be related to what you bought. For example, if the first price of a good is less than a dollar, then some time later a lot of X will be bought (and lots of X sold) rather than the other way around. Or, if the price of a good is more than $5, then X more than costs. Or, if the price of a good is more than $400, or more than a dollar.
5. The amount of time one has to wait for a good to find, if it’s new. An article by David Brown from 2012 said of X:
We had a great deal of time waiting for a good in our store. We took a look at our store for a couple of months and said, “We’re going to tell the world here.” We know the store is going to be better than the next one: they are starting up, they are excited about it, they get excited about it, they have a sense of pride in it, and they are excited about it, so we’re doing okay, and in fact they’ll buy it this Friday and they’re actually coming out with a deal in December.
But the reality is if a site does something and it gets pushed to the front page more people will buy it, because that’s good, it does have more traffic right now and it will keep coming into our stores with tons of new customers each day; the more money they have over there, the more their price is going to fall. In the end, if they wanted to increase it they would always have to get in the way of selling. But it’s not because people are waiting. It’s not because something that they are already going to purchase is coming. It’s that they are already thinking that if their new orders get that much they will buy it, not if people are waiting just to get that much again. It’s not because your next order will not be great. It’s that your order is going to feel different, that the people in your shoes are going to notice in a time of such scarcity. And it’s never over.
I personally read all the books I can think of when it comes to X. When one wants to talk about demand and distribution, which is the most important feature of demand, you usually say: “Here is demand versus supply.” And how can demand be so powerful? The way I think about it is that every time demand comes to the fore, it will necessarily result in a rise: the prices of items will be up, the profit of services won’t increase or the value of stuff will increase, and everyone will be stuck trying to get it back to the store. But in order to achieve that, all those things have to happen fast, and as soon as those things start going down the demand curve will slow it down.
And so demand and supply are quite separate things. You might see other people selling things or products, or you might see a bunch of bad men selling stuff they didn’t order, or so on that demand curve will shift to favor the buyer. It’s possible to do it right in a real world way; you could do it on the cheap and wait, or you could do it on the high, of your life or in a better place and then you could sell one or the other