Law Of Supply And Demand Essay

2017 words - 8 pages

IntroductionIn this paper we are going to examine four different scenarios that demonstrate the laws of supply and demand in our economy. The first section is going to describe the effect of income increases on the computer market. In the second section, we are going to examine the effects that major construction to the tunnels surrounding Manhattan have on the Manhattan apartment market. In the third section, we will look at the elasticity of business and commercial airline passengers and examine this elasticity. The fourth section will explain how a market with two different sports teams changes with winning records and ticket prices.Section OneFigure 1. Income increase example on demand for computersThe above graph illustrates the short-term effect an increase in consumer income would have on the demand curve for computers. Prior to the increase, the equilibrium point occurred at a quantity of 150,000 computers priced at $600. As consumer income increases, an immediate shift in demand occurs as shown by the blue line in Figure 1. At the current equilibrium price of $600, the demand increases to about 220, 000 computers, resulting in a shortage. In response to this shortage, assuming nothing influences the supply curve, the computer producers will increase the price of computers. This in turn causes a reduction in demand and a new equilibrium point at a higher price. In this graph, it would be around 180,000 computers at a price of $750.Section TwoGraph 1 represents the apartment market in Manhattan. The equilibrium is at (120,000, $2,000). The Manhattan area has a price control on the apartment market. This serves as a price ceiling which does not allow owners to rent apartments for more than $2,000 per month. These price controls create a shortage in the apartment market. As Marks explains (1997), "Rent regulations are the single greatest impediment to creating new housing opportunities," Senator Bruno says, noting that New Yorkers should move to wherever they can afford to live, "like everybody else in the world." There has not been an increase in the housing available because of the price ceiling and very limited profit available for landlords. The demand for apartments is around 150,000 but there are only 120,000 available at this price (150,000 demanded- 120,000 available at the price= 30,000 shortage).The New York Metro Transit Authority plans to announce the major construction plans for repairing the Holland, Lincoln and Midtown tunnels. This construction will take six to eight years and drivers are to expect delays that can range from moderate to lengthy. This construction will cause the demand for apartments in Manhattan to increase. This is because people that live in New Jersey and surrounding areas that commute to Manhattan using these three major tunnels will prefer to rent an apartment in Manhattan to avoid lengthy commuting, traffic jams and delays. This increase in demand for apartments in Manhattan will cause the demand to...

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