# Expert answer:ECON101 Demand and Supply Discussion

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introduction_to_module_2___econ_101_xw__summer_2019_.pdf

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6/10/2019
Topic: Discussion on Demand and Supply (Module 2) (due Monday, June 10th) (5 points)

This is a graded discussion: 5 points possible
due Jun 10
Discussion on Demand and Supply (Module 2) (due Monday, June 10th) (5 points)
13
13
Part 1: This assignment requires you to show the connection between vehicle sales and current income (Gross Domestic Product)
using real data.
a) Plot the vehicle sales and Gross Domestic Product in the same diagram and embed the graph in your reply:
­Go to the following website: https://fred.stlouisfed.org
(https://fred.stlouisfed.org/) .
­First plot the following data series: Total Vehicle Sales, Millions of Units, Seasonally Adjusted Annual Rate. (Hint: use the Search box in the front page).
­After plotting the data, edit the data series by choosing the frequency “Quarterly”. (Click on the orange “Edit Graph” button on the right upper corner. Then
select “Quarterly” from the “Modify frequency” drop­down list.)
­Also, concentrate on looking at the last 15 years (2002­2017). You can adjust the years in the boxes located right above the graph.
­ Next, add the second data series “Gross Domestic Product” by clicking on “Edit Graph” > “Add Line” and typing “the Gross Domestic Product” (choose series
Gross Domestic Product, Quarterly, Billions of Dollars, Seasonally Adjusted Annual Rate).
­ Modify this data series by choosing “Units: Percent Change”.
­ Finally, change the Y­axis position to the right for the second data series by clicking “Edit Graph” > “Format”, and change the Y­axis position for line 2 to be
“right”.
You should now have a graph showing the connection between Vehicle Sales and Gross Domestic Product. Embed your diagram to
your reply by clicking on “Share Links” under the graph, then choosing “Embed in website”, and copying the embed code. Then go
to your discussion post, click on “Insert/Edit Media” > “Embed”, paste your code and click on “Ok”. (max. 1 point)
b) As the vehicle sales series reports total vehicle sales, it represents the number of vehicles bought and sold in the market at each
point in time, and thus it can be interpreted as a point on the demand curve. The Gross Domestic Product can be interpreted as the
current income in the economy. By looking at your graph, what is the relationship between the vehicle demand and the current
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6/10/2019
Topic: Discussion on Demand and Supply (Module 2) (due Monday, June 10th) (5 points)
income? How do the total vehicle sales and the percent change in GDP move over time? In the same or in opposite directions?
(max. 1 point)
Part 2:
Now assume that current income of households increases, and at the same time the prices of iron and steel decreases. Assume
also that the new equilibrium quantity for vehicles increases and the new equilibrium price decreases. Use DrawIO to show in the
supply­demand framework how supply and demand curves would shift under this scenario. Carefully label everything in your
diagram (axes, original supply and demand curves, new supply and demand curves, original price and quantity in the equilibrium,
new price and quantity in the equilibrium), and explain your answer (max. 2 points)
Here are instructions how to embed you DrawIO diagram into Canvas:
(https://iastate.box.com/s/5bv35le6qb0trabn2to70c6ji57h2e5s) DrawIO info for Canvas
(https://iastate.box.com/s/fbbal7vzhl3txbara7i2blzfasxtmcy9)
Provide feedback on someone else’s reply. (max. 1 point)
Search entries or author
(https://www.draw.io/)

Replies are only visible to those who have posted at least one reply.
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6/10/2019
Introduction to Module 2 : ECON 101 XW (Summer 2019)
Introduction to Module 2
This module explains demand and supply, and the inﬂuences on demand and supply. It also explains how
demand and supply determine prices and quantities bought and sold in a competitive market, as well as using the
demand and supply model to make predictions about changes in prices and quantities. The module demonstrates
how a price ceiling, a price ﬂoor, and a tax aﬀect price and output sold in a competitive market. The price
elasticity of demand, the price elasticity of supply, income elasticity and cross-price elasticity are deﬁned
and calculated.
Module­level objectives are:
1.
Explain that prices and quantities traded are determined by the interaction of buyers and sellers in a market.
2.
Define demand and supply, and differentiate between demand and quantity demanded, and between supply and quantity supplied.
3.
Explain the law of demand and the negative relationship between price and quantity demanded.
4.
Explain the law of supply and the positive relationship between price and quantity supplied (increasing marginal cost).
5.
Identify the variables that causes a movement along the demand and supply curves and what causes a shift in the demand and supply curves.
6.
Show how demand and supply determine prices and quantities in markets (market equilibrium) and how prices adjust to eliminate a shortage or a surplus.
7.
Illustrate and apply changes in prices and quantities when demand and supply change.
8.
Use supply and demand to determine the impact of a price ceiling or a price floor on price and output.
9.
Use supply and demand to determine the effect of a tax paid by suppliers or demanders on the price and equilibrium quantity of a good.
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Introduction to Module 2 : ECON 101 XW (Summer 2019)
10. Define, calculate, and interpret the price elasticity of demand, the income elasticity of demand, the cross­price elasticity of demand and the price elasticity
of
supply; understand the difference between a normal good and an inferior good.
11. Explain the factors that influence the price, cross­price and income elasticities, and how total revenue depends on the price elasticity of demand.
12. Contrast the elasticity of supply in the immediate period, short run, and long run.
(https://iastate.box.com/s/q5ynid8xecrk7h99nmjd47nzha4o5xlg)
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