Analyzing Changes in Demand: The MAIR Approach
| M | Market |
| A | Action |
| I | Interpretation of Action: Is this a change in demand or a change in the quantity demanded? If it is a change in demand, which shift parameter is being affected? |
| R | Results on Equilibrium Price and Quantity |
Do the following exercises. Use supply and demand analysis and a graphical
representation of these curves to show the effects of the action. Use the rubric
above to interpret the effects of the change.
Market: Corn Syrup (fructose)
Action: The price of refined sugar (sucrose) increases.
Interpretation: This is a shift parameter affecting
demand because sucrose is a substitute for fructose and vice versa.
Results: I will leave it up to you to draw the
demand curves
Market: iPhones
Action: A decrease in the price of Android Phones.
Interpretation: This is a shift parameter for
demand because Android Phones are a good substitute for iPhones.
Results: I will leave it up to you to draw the
demand curves
Market: High Mileage per Gallon automobiles.
Action: The price of oil falls.
Interpretation: Your turn...
Results: Your turn again...
Market: Houses
Action: You win $2,500,000 in the lottery (you
have a much better chance of being hit by lightning- don't get too excited.)
Interpretation: Your turn...
Results: Your turn again...
Market: Houses
Action: The economy has entered a recession and
the general level of income is falling.
Interpretation: Your turn...
Results: Your turn again...
Market: Stocks
Action: The rate-of-return for bond investments
fall over a three-year period.
Interpretation: Your turn...
Results: Your turn again...
Market: Snuggies
Action: The American population goes nuts over
the things (it must be something in the fluoridated water supplies...)
Interpretation: Your turn...
Results: Your turn again...
Market: Ice in Fort Myers
Action: Hurricane Bradley is headed our way and
it is expected to hit us within 36 hours.
Interpretation: Your turn...
Results: Your turn again...
On the last MAIR analysis answer these additional questions:
a) What is likely to happen to normal ice stocks in this situation over the
36 hours?
b) What is likely to happen to the price of ice if no price restrictions are
imposed and there are no "price gouging" laws?
c) What are the effects of "price gouging" laws on the availability
of ice?
d) Suppose we run out of ice. What tools could be brought to bear on the market
to have it deliver more ice to our area?
e) What do you think the typical Fort Myers' journalist would say about this?
f) What do you think the typical Fort Myers' resident would say about this?
g) What do you think your typical Fort Myers' economist would say about this?
