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Global Context of Modern Business

Tutorial 9

Supply and demand

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Activity 1

• Work in pairs–Using a product of your choice (e.g. Housing,

computers etc.) as an example• Draw a supply and demand diagram showing

equilibrium price and quantity. Do the same for excess supply and excess demand. Show your plan to your tutor and the rest of your group members and try to explain them excess supply and demand in your own words

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Activity 2

• Read Mini-case ‘Rise and rise of the UK coffee bar market’ p.54, in Wetherly and Otter (2011)– With your group, proceed to answer the following

questions:

• Using equilibrium analysis, show the effect of the increase in demand for drinking coffee in branded coffee shops available and the prices of coffee.

• What does the evidence that sales of coffee in branded coffee shops are not declining despite the recession tell us about the nature of the demand for this type of coffee?

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Activity 3

• Group Competition with practice questions: With your group read and review the following questions:

–New research has just been published saying that chocolate causes cancer. What would happen to equilibrium price and quantity supplied in the market for Thornton's chocolate? Draw the graph that illustrates your answer.

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Activity 3

–Presume that the price of Mars chocolate increases. What would happen to equilibrium price and quantity in the market for Cadbury chocolate? Draw the graph that illustrates your answer.

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Activity 3

• Suppose that the price of sugar increases. What would happen to equilibrium price and quantity in the market for Thornton's chocolate? Draw the graph that illustrates your answer.

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Activity 3

• A company has just invented a better and more advanced machine for mixing the ingredients to make chocolate bars. What would happen to equilibrium price and quantity in the market for Thornton's chocolate? Be able to draw the graph that illustrates your answer.

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Activity 3

• A recent survey has just shown that chocolate is Britain’s favourite ice-cream flavour. For each of the following, show the possible effects on demand, supply, or both as well as equilibrium price and quantity of chocolate ice cream. – A severe drought in the Northwest causes dairy farmers to reduce the number

of milk-producing cattle in their herds by a third. These dairy farmers supply cream that is used to manufacture chocolate ice cream.

– A new report by the British Medical Association reveals that chocolate does, in fact, have significant health benefits.

– The discovery of cheaper synthetic vanilla flavouring lowers the price of vanilla ice cream.

– New technology for mixing and freezing ice cream lowers manufacturers’ costs of producing chocolate ice cream.