Economics 201- Lab 31. Graphing a MarketDraw a market with a typical supply and demand curve. Consider making it something specific, like the market for coffee, or chicken, or lamps, or houses, etc.a. Draw an increase in supply. Name some of the factors that would cause an increase in supply.Price decreases, quantity increases. Supply shifters: price expectations for sellers,price of inputs, technology advances, number of sellersb. Draw a decrease in supply. Name some factors that would cause a decrease in supply.Price increase, quantity decreases. Supply shifters: the same but opposite of above.c. Draw an increase in demand. Name some factors that would cause an increase in demand.Price and quantity both increase. Demand shifters: popularity, income, related goods, pricing, number of buyers, price expectation for buyersd. Draw a decrease in demand. Name some factors that would cause a decrease in demand.Price and quantity both decrease. Demand shifters: the same but opposite as above.e. Finally, did you ever name the price of the good/service/product as a shifter? Why not? Why is the price of the good/service itself not a shifter?No, because the price of the good/service itself is a result of the supply and demand. Change in price is a move ALONG the curve.2. Interconnected MarketConsider the market for Pepsi soft drinks. Suppose that it is currently in equilibrium.a. Graph itb. Suppose that Pepsi bottling factories adopt new and better technology that allows them to bottle and ship more bottles and cans of Pepsi each day than before. How does this affect the market for Pepsi soft drinks? Price decreases and quantity increases.c. How might this affect the market for coke? Graph it.Because the two can be thought of as substitutes, a decrease in price of one will cause a decrease in demand for the other.PEPSI COKE 3. Consider the market for desktop computers, and assume the market is in equilibrium. Say that the current equilibrium price is $800.a. Graph this market.b. Suppose that the price of computer processor units (cpu’s) rises. These are inputs to computers. Graph the change and show the new equilibrium.c. Suppose that because of the event above, the new equilibrium price of computers rises to $1,000. Buyers who wish to pay $800 can no longer find and purchase a computer. Does this imply a shortage of computers?There is not a shortage because there are computers available, but the buyers just don’t want to pay the market price.4. Demand and Supply AnalysisConsider the market for minivans. For the following events, use supply and demand analysis to predict changes in the market outcome (equilibrium price and quantity of minivans). It would be very helpful to use a graph.a. United Auto Workers of America, the largest union of auto workers, demand and receive higher wages for auto workers.Price increases and quantity decreases. This is a decrease in supply.b. A new study released by the Federal Department of Transportation states that minivans are the safest form of auto travel.Price and quantity increase. This is an increase in demand.c. The stock market soars, causing a rise in the general income of consumers.Price and quantity both increase. This is an increase in demand.d. There is a technological advance in the production of minivans.Price decreases and quantity increases. This is an increase in supply.e. Consumers expect the price of minivans to fall in the future.Price decreases and quantity decreases. This is a decrease in demand.f. The price of gasoline falls dramatically.Price and quantity both increase. This is an increase in demand.g. Auto makers expect the price of minivans to rise in the future.Price increases and quantity decreases. This is a decrease in supply.h. The price of SUV’s rises.Price increases and quantity increases. This is increase in demand if it is looked atas substitutes.5. Summertime is prime vacation time. This means car trips, plane trips, cruises, etc. Typically, the price for a gallon of gas usually is higher in the summer then other seasons.Now suppose that this summer the members of OPEC decide to increase the amount of oil pumped, produced, and exported. Suppose that the price of a gallon of gas falls during the summer. How can we use supply and demand to explain this?This is an increase in demand.An increase in car trips/plane trips/etc means an increase in demand for oil, so price andquantity both increase. However, we are told there is also an increase in oil supply and that the price falls. For that to happen, supply and demand both increase but supply has to increase MORE to offset a price increase due to the demand increase. Therefore, pricewill decrease and quantity will