Question

For the scenarios discussed below, use supply and demand curves and a graph to analyze what will happen to both price and quantity in equilibrium given the information available below. Graphs MUST be half a page each. When it is impossible to pin down the direction of the effect, discuss what is more likely in your opinion and why. Make sure to differentiate between movements of curves and movements on curves. For example, you could say something like this: “the supply curve moves to the right. As a result, price decreases, and quantity supplied (and demanded) in equilibrium increases”.

1. You are the CEO of Whole Foods. Your market research people inform you that Aldi is to open several new branches in Chicago, but not in Los Angeles. Analyze both the Chicago market and the Los Angeles market (separately).
2. You are the CEO of Tiffany. Your economists inform you that they predict a recession starting next year. Analyze what you expect what will happen to the price and quantity of a typical good sold at your stores.
3. You manage the CTA. Your economists predict a recession next year. Your weather experts predict a very hard, cold winter. Analyze the market for bus rides for next winter.

Answer 1