Question

Do an internet search for an article about recent market activity that demonstrates how the interaction of supply and demand have affected the market price and quantity of a good or service. Specifically, and this is what you will be graded on:

1. Linked below is a file titled “How to Analyze Supply and Demand Problems” and contains 11 steps to analyze a supply and demand problem.
2. Walk through the 11 steps in analyzing your article scenario.  
3. Also, initially provide a short summary of your article along with a link to the article. You cannot use an article previously posted if you want credit.

So begin your response with an overview and then post in the 11 steps (below) and write your analysis after each step. The steps are:

What is the starting situation?

What is the change in the situation?

Does it affect Demand or Supply?

Has it caused a movement along the curve, or a shift of the curve? (movement is caused by a price change and shift is caused by OTHER factors))

If it is a movement, is it up, or down the curve?

If it is a shift of the curve, did the curve shift to the left or to the right?

What reaction did this cause in the other curve?

What is the final change in the equilibrium point?

Is the final price higher, or lower?

Is the final quantity higher, or lower?

Answer any special questions.

Answer 1

Consider the case of downtown Durham, Demand for durham homes increased sharply.

Summary:

Around 4015 new hosuing units were built in 2016 and 4316 more were build in 2017.Every year about 7,000 people moves to the city.The demand for hosuing in durham outweighs the supply, which is driving up prices. New homes in the area can sell for more than $300 per square, where $200 per square foot was the benchmark.

Analyzing supply and demand:

Starting situaution is Market price is $200 and quantity demanded is 4015.

Change is demand has increased. This has increased supply.

There is movement along the curve. Increasing price causes upward movement.

Change in Equilibrium price :

New price is $300, old price is $200. Final price is higher.

Quantity demanded inreased to 4316 from 4015. Final quantity is higher.