ECO-20043 - Microeconomics and Decisions - Resource Recs

ECO-20043 - Microeconomics and Decisions Competency In this project, you will master the following competency: ● Inform business decisions using microeconomic models and theories Scenario You work for Orizont Consulting, a small but growing economic consulting firm. When you arrive on Monday, you find an email with exciting news: Date: Tue 10/5/2018 9:17 PM From: Schmidt, Andreas Subject: New Project Attachments: Report Templates (see Supporting Materials) To all employees, I am happy to announce that Orizont has secured its first high-profile client. They’ve asked to remain undisclosed for the time being—but I can tell you that this is a huge breakthrough for our little firm! Now, for the specifics: We’ve been contracted to help inform their future product offerings (all of which are consumer products). We’ll be doing this through a series of detailed economic reports, each on an individual product. They’re looking to get ahead of the curve and want to understand recent or near-future trends. They’re also interested in some of the larger impacts of what they might produce. We have a lot of work ahead of us, more than any one person can accomplish on their own. I’ve put together a template for us all to use as we create our larger report. Please choose a consumer product and begin your work, using this template as a guide. Your managers will compile them into one streamlined deliverable for our client. Thank you for your continued great work—we wouldn’t be here without you. Go team! Andy Schmidt President Orizont Consulting Directions Product Report: Before getting started, review the email and attachments from Andreas Schmidt, which outline his expectations for your work.

Please note that, for the purposes of this project, you may choose the product to study. Specifically, make sure to choose a product that is a consumer good. Keep in mind that goods are tangible products. For example, soft drinks, clothing, cars, and electronics are all types of consumer goods. If you are unsure about your choice, you may post to the Public Project Channel in the Discussions area of this competency. 1. For the product you’ve chosen, consider economic trends (real or hypothetical) that might impact this product. You should come up with at least two: one for supply and one for demand. Some examples that you may use: ○ A change in preferences due to a fashion or health trend ○ A shift in demographics due to aging populations ○ An increase or decrease in the input costs (such as cost of raw materials or labor) needed to offer a product ° Note: Although research is not required for this step, it is encouraged. See the Supporting Materials section of this project for some recommended databases. ° Please note that, while this section is not checked for mastery, it is needed as a basis for the rest of your project. 2. For each economic trend you consider, describe it according to the determinants of supply and demand . Use the determinants from the following list: ○ Demand : Income, prices of related products, preferences, demographic characteristics, buyer expectations ○ Supply : Prices of factors of production, technology, returns from alternative activities, the number of sellers, seller expectations, natural events 3. Using one of the trends that you’ve described above, model the shift in supply or demand for this product. Make sure to use appropriate labels and terminology in your model . ○ Note: To model the shift in supply or demand graphically, you may use the drawing tools in Microsoft Word, or use the graphing tool linked in the Deliverables section and take a screenshot. Alternatively, you may describe the shifts that will occur. 4. Explain your rationale for this shift (based on the model above) using appropriate economics terminology . As you work, consider the following: ○ The difference between a shift in supply or demand versus a shift in the quantity supplied or demanded ○ How the equilibrium will shift 5. The firm is also interested in understanding the elasticity of price for this product within the market. Consider a rise in the price of this product and determine if demand is elastic or inelastic based on an application of the determinants of price elasticity of demand . For each of the determinants in the following list, consider the impact on the elasticity of demand for the product: ○ Availability of substitutes ○ Time ○ Importance in household budgets ○ Luxury or necessity (such as addictions or habits) 6. The firm is considering how the price of this product might change its demand. Using your determination on elasticity, explain how a price increase would impact revenue for this product. 7. In addition to the trends and shifts, the company is also interested in understanding possible ramifications of this product on the larger world. Discuss a potential externality of a transaction for this product . It may be positive or negative. For example: ○ Pollution from secondhand smoke or product waste

Rubric Use this as a guide/checklist when completing your projects. Make sure you are meeting the criteria below. Product Report Describes an economic trend according to the determinants of supply and demand Introduction to Supply and Demand (2:29) Learn about the concepts of supply and demand, and the conditions that affect them, in this video from our business department. Supply and Demand (Video,10:21) This Crash Course video explains one of the fundamental economic ideas, supply and demand, which is important for everything economically. Supply and demand sets prices, and indicates to manufacturers how much to produce. Models a shift in supply or demand for a product using appropriate labels and terminology A Deeper Look at the Demand Curve (Video, 7:46) In this short video from Marginal Revolution University, Tyler Cowen explains how to read the demand curve in two ways (horizontally and vertically) and introduces you to the concept of consumer surplus. The Demand Curve Shifts (Video, 13:59) In this short video from Marginal Revolution University, Tyler Cowen takes a deeper dive into the demand curve and its determinants. He explains how and why a demand curve shifts, influenced by the determinants of demand. A Deeper Look at the Supply Curve (Video, 7:30) In this short video from Marginal Revolution University, Alex Tabarrok explains how to read the supply curve in two ways (horizontally and vertically) and defines the concept of producer surplus. The Supply Curve Shifts (Video, 12:15) In this short video from Marginal Revolution University, Alex Tabarrok discusses supply curve shifts and the factors that influence shift: the determinants of supply. Explains the rationale for a shift in supply or demand using appropriate economics terminology Markets, Efficiency, and Price Signals (Video, 11:00) This Crash Course video explains how markets work and how they achieve productive and allocative efficiency. Price signals in the marketplace are an important part of this process. Changes in prices signal to consumers that they should consider adjusting their behavior to buy more or less. Similarly, price changes signal to producers that they should produce more or less, and thus use their factors of production in the best possible way. Changes in Market Equilibrium (Video, 9:05)

In this video from Khan Academy, Sal Khan analyzes the impact of changes in the determinants of supply and demand on the equilibrium price and quantity in the marketplace. Determines if demand is elastic or inelastic based on an application of the determinants of price elasticity of demand Elasticity of Demand—The Economic Lowdown Podcast Series, Episode 16 (Podcast, 11:47) In this web-based podcast, economics educators from the Federal Reserve Bank of St. Louis explain how economists think about elasticity and how elastic, inelastic, and unit elastic demand curves work. Explains how a price increase would impact revenue for a product Price Elasticity of Demand and Total Revenue (2:08) This video explains the impact of price increases on revenue if the item is elastic or inelastic. Different Customers, Different Prices, Thanks to Big Data In this article from Forbes Media, Adam Tanner explains how data mining and individualized pricing help companies address the issue of price elasticity of demand. For example, companies identify price-sensitive customers and offer them discounted prices. Economists say that such strategies can help address elastic demand curves by separating price- sensitive customers into a market of their own. Discusses a potential externality of a transaction for a product An Introduction to Externalities (12:14) In this video from Marginal Revolution University, Alex Tabarrok discusses the concept of negative externalities, using the example of bacteria and antibiotics. Tabarrok also provides an overview of several important terms you use when discussing externalities. External Benefits (7:31) In this video from Marginal Revolution University, Alex Tabarrok explains how positive externalities work, using the example of vaccination, and the solutions that the society can implement to increase the level of consumption of goods and services with positive externalities. General Articulation of Response: Clearly conveys meaning with correct grammar, sentence structure, and spelling, demonstrating an understanding of audience and purpose Grammarly - free spelling/grammar checker (10/10 recommend) Writing Resources (AdvanceEDU Recommendations) Academic Support on Brightspace Lists sources where applicable using citation methods with no major errors Citation Help Need help citing your sources? Use the CfA Citation Guide