Analyzing Changes in Supply: The MAIR Approach
| M | Market |
| A | Action |
| I | Interpretation of Action: Is this a change in supply or a change in quantity supplied? If it is a change in supply, 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: Orange Juice
Action: A freeze destroys 30% of the fruit used
to produce juice.
Interpretation: This is a shift parameter for
supply because oranges are an input into the production of orange juice.
Results: I will leave it up to you to draw the
supply curve shift.
Market: Computers
Action: A price war in the chip industry drive
chip prices down by 20%.
Interpretation: This is a shift parameter for
supply because _________.
Results: I will leave it up to you to draw the
supply shift.
Market: Domestic Automobiles
Action: Trade barriers are dropped and more automobiles
are imported into the U.S.
Interpretation: Your turn...
Results: Your turn again...
Market: Housing Market
Action: The price of building materials for houses
(e.g., lumber, plumbing supplies, electrical supplies, etc.) rises by 20%.
Interpretation: Your turn...
Results: Your turn again...
Market: Wort
(used in beer making)
Action: A Harvard study claims that eating 3 tablespoons
a day significantly reduces heart disease. .
Interpretation: Your turn...
Results: Your turn again...
Market: Soybeans
Action: Midwest Farmers believe that wheat prices
will be in steep decline due to bumper crops from Australia.
Interpretation: Your turn...
Results: Your turn again...
Market: Portable MP3 players
Action: New recording technologies drive down
per-unit production costs by 10%.
Interpretation: Your turn...
Results: Your turn again...
Market: Ice in Fort Myers
Action: New environmental requirements require
all ice producers to install expensive filtration systems in their production
process in order "to protect the consuming public."
Interpretation: Your turn...
Results: Your turn again...
For the last MAIR analysis answer these additional questions.
a) What is likely to happen to the market for ice in the short-run?
b) What is likely to happen to the market for ice in the long-run?
c) Is this a good idea or a bad idea? You must justify your answer.
d) What might be the secondary effects of this policy?
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?
