Describe the factors that impact the market equilibrium price and quantity? use graphs to demonstrate your answers

Using graphs to prove……….7 Example 1: A Change in Market Equilibrium Due to a Shift in Demand...7 Example 2: A Change in Market Equilibrium Due to a Shift in Supply...8 Example 3: Shifts

VIETNAM NATIONAL UNIVERSITY, HANOI

UNIVERSITY OF LANGUAGES AND INTERNATIONAL STUDY

ASSIGNMENT

PRINCIPLES OF MICROECONOMICS

Describe the factors that impact the market equilibrium price and quantity? Use

graphs

to demonstrate your answers? Use the demand-supply diagrams to show the effect

of the COVID-19 pandemic on the tourism market in Vietnam?

Fullname: Nguyễn Hải Yến, Nguyễn Mai Xuân, Phạm Quỳnh Linh, Lê Huyền Chang, Đỗ Phương Linh, Trịnh Trang Nhung, Phùng Lan Anh Student ID: 20043671, 20043670, 20043655, 20043643, 20043653, 20043663,

20043642 Class No: SNHU.20E6 (Group 1)

Instructor: Assoc Prof Phan The Cong

YEAR 2021

The report will begin with an explanation of the elements that influence market equilibrium quantity and price We'll look at market fundamentals such as supply and activity, as well as how we interact with one another and the important components that determine the equilibrium price and what makes the difference This price is being exchanged

Understanding these is crucial to comprehending the differences between buyers and sellers in the market economy when performing goods exchanges The team will demonstrate efficiency using precise supply and demand statistics and charts

The COVID-19 epidemic wreaked havoc on the economy, as well as causing a slew of other issues that stymied industry demand for goods and services Vietnam's tourism industry, in particular, was badly impacted, resulting in a significant drop in both tourist numbers and earnings How do firms respond to new developments? What will happen to the equilibrium?

Table of Contents

Abstract……… …1

I Factors affecting market equilibrium quantity and price……… 3

1 The factors that cause supply to change 3

a) Prices 3

b) Technology 3

c) Expectations 3

d) Policy of government 4

2 The factors that cause demand to change 4

a) Price of the good itself 4

b) Income 4

c) Prices of Related Goods 5

d) Expectations 5

e) Number of Buyers 6

f) Interest 6

3 Shift in both supply and demand now 6

II Using graphs to prove……….7

Example 1: A Change in Market Equilibrium Due to a Shift in Demand 7

Example 2: A Change in Market Equilibrium Due to a Shift in Supply 8

Example 3: Shifts in Both Supply and Demand Now 9

III Use a supply-demand chart to show efficiency of the COVID-19 pandemic on the Vietnamese tourism market………10

1 Tourism market nationwide 10

2 Next is the Phu Quoc tourism market 11

IV References sectio.……… 12

I Factors affecting market equilibrium quantity and price

+ To find the factors that effect on equilibrium price and quantity, we must identify concept of equilibrium market that we learned in chap 4

Concept : At the equilibrium price, the quantity of the good that buyers are willing and able to buy exactly balances the quantity that sellers are willing and able to sell

+ We have Three Steps To Analyzing Changes in Equilibrium

Decide whether the event shifts the supply or demand curve (or both)

Decide whether the curve(s) shift(s) to the left or to the right

Examine how the shift affects equilibrium price and quantity

Therefore, The equilibrium price and quantity depend on the position of the supply and demand curves When some event shifts one of these curves, the equilibrium in the market changes, resulting in a new price and a new quantity exchanged between buyers and sellers

The factors that cause supply to change ( cung thay đổi, giá và lượng cân bằng cũng đổi)

1 The factors that cause supply to change

a) Prices

Changes in production costs are also often associated with fluctuations in the prices of inputs: raw materials, equipment, workers, etc when their prices increase, a few other factors Held the same, the cost of producing the good will increase and the supply curve for this good will shift up and to the left On the other hand, when inputs to the production process become cheaper, the cost

of production will decrease, and the supply curve for the good will shift downwards and to the right

To produce their output of ice cream, sellers use various inputs: cream, sugar, flavoring, ice-cream machines, the buildings in which the ice ice-cream is made, and the labor of workers who mix the ingredients and operate the machines When the price of one or more of these inputs rises, producing ice cream is less profitable, and firms supply less ice cream If input prices rise substantially, a firm might shut down and supply no ice cream at all Thus, the supply of a good is negatively related to the price of the inputs used to make the good

b) Technology

The production cost of a good is always strongly affected by changes in technology and production techniques Because thanks to technological progress, the cost of producing goods can

be quickly lowered it is the source of the rapid increase in supply The supply curve tends to shift downwards (due to falling production costs) and to the right (because producers are willing to supply more of a good at each price)

The technology for turning inputs into ice cream is another determinant of supply The invention of the mechanized ice-cream machine, for example, reduced the amount of labor necessary to make ice cream By reducing firms’ costs, the advance in technology raised the supply

of ice cream

c) Expectations

People's expectations about the future often have an important influence on decisions in the present When making a supply decision for a good, producers have a definite picture of its future price that is, the expected price When this expected price level changes, they will also change the quantity supplied at each current price of the good Therefore, the current supply of the good will tend to decrease or the supply curve of the good will shift to the left and up

The amount of ice cream a firm supplies today may depend on its expectations about the future For example, if a firm expects the price of ice cream to rise in the future, it will put some of its current production into storage and supply less to the market today

d) Policy of government

Government policies have a great influence on the cost of production of businesses By that policy, the state can regulate its behavior and affect the production conditions of enterprises If firms can carry out production in an easy or favorable environment, their cost of Production usually decreases and the quantity supplied of a good increases, the supply curve of the good will shift to the right and down On the contrary, policy regulations make the production process more expensive and less convenient, the production costs of enterprises will increase and the quantity supplied of the good will decrease, the supply curve of the good will decrease move left and up The direct impact on the cost of ice cream production of businesses is the tax policy of the state When the state increases a tax on an ingredient, the overall cost of producing ice cream increases The supply of the good in this case will decrease When taxes are reduced, the overall cost of producing goods goes down The supply of goods will increase

- Decrease equilibrium price - Increase equilibrium price

- Increase equilibrium quantity - Decrease equilibrium quantity

2 The factors that cause demand to change

a) Price of the good itself

Represents a movement along the demand curve

b) Income

Income is an important factor influencing the decisions of consumers A change in income often leads to a change in their needs However, the effect of income on the demand for goods can be different, depending on the nature of the good itself under consideration:

For common goods (delicious beef, cars, motorbikes, education, etc.), the demand for a good will increase as the consumer's income increases The corresponding demand curve will shift

to the right In the opposite case, when income decreases, consumer demand for the good will decrease The corresponding demand curve will shift to the left

For ordinary goods: cassava, potatoes, corn, are considered secondary goods When income is low, consumer demand for these goods is relatively high As incomes increase, consumer demand for them decreases and the demand curve shifts to the left

What would happen to your demand for ice cream if you lost your job one summer? Most likely, it would fall A lower income means that you have less to spend in total, so you would have to spend less on some and probably most goods If the demand for a good falls when income falls, the good

is called a normal good Normal goods are the norm, but not all goods are normal goods If the demand for a good rises when income falls, the good is called an inferior good An example of an inferior good might be bus rides As your income falls, you are less likely to buy a car or take a cab and more likely to ride a bus

c) Prices of Related Goods

The demand curve describes the relationship between the quantity demanded of a good and its price level The prices of other goods are considered as a factor in the phrase "others constant" When this type of price changes, the demand curve for the good we are analyzing changes and shifts How such an effect plays out depends on the relationship of these goods

to the good being shown on the demand curve

Suppose that the price of frozen yogurt falls The law of demand says that you will buy more frozen yogurt At the same time, you will probably buy less ice cream Because ice cream and frozen yogurt are both cold, sweet, creamy desserts, they satisfy similar desires When a fall in the price of one good reduces the demand for another good, the two goods are called substitutes Substitutes are often pairs of goods that are used in place of each other, such as hot dogs and hamburgers, sweaters and sweatshirts, and cinema tickets and film streaming services

Now suppose that the price of hot fudge falls According to the law of demand, you will buy more hot fudge Yet in this case, you will likely buy more ice cream as well because ice cream and hot fudge are often used together When a fall in the price of one good raises the demand for another good, the two goods are called complements Complements are often pairs of goods that are used together, such as gasoline and automobiles, computers and software, and peanut butter and jelly

d) Expectations

By the demand curve for a good, one means the relationship between the quantity demanded

of the good and its own current price level When the expected price increases, the demand for the good will increase and the demand curve will shift to the right Conversely, when the expected price falls, the demand for the good will decrease and the demand curve will shift to the left

The most obvious determinant of your demand is your tastes If you like ice cream, you buy more of it Economists normally do not try to explain people’s tastes because tastes are based on historical and psychological forces that are beyond the realm of economics Economists do, however, examine what happens when tastes change

e) Number of Buyers

The factors that are important to the requirement for a said commodity can use the analytical path of an individual as well as of the market as a whole However, the market demand curve is

formed on the basis of the aggregate of individuals, so the more individual users participate in the market, when other coefficients do not change, ask the school to talk about a goods are higher In other words, as the number of buyers or users consuming on a commodity increases, so does the market demand for this good and vice versa

In addition to the preceding factors, which influence the behavior of individual buyers, market demand depends on the number of these buyers If Peter were to join Catherine and Nicholas as another consumer of ice cream, the quantity demanded in the market would be higher at every price, and market demand would increase

f) Interest

Consumer preferences reflect their attitudes toward the commodity, as an object of consumption The level of love and liking of people about a commodity is very different Faced with the same product, one person may like it, the other may dislike it with different degrees of evaluation When considering a demand curve for a good we assume that consumer preferences are determined As consumer preferences change, the quantity demanded by consumers at each price level also changes The demand curve in this case will shift When a good is more preferred by consumers than before, the market demand for it will increase and the demand curve will shift to the right Conversely, for some reason, the consumer's preference for a good decreases , the demand for this good will decrease

- Increase equilibrium price - Decrease equilibrium price

- Increase equilibrium quantity - Decrease equiblibrum quantity

3 Shift in both supply and demand now

Include four cases:

Case 1: Increase Supply and Increase demand

Case 2: Decrease Supply and Decrease demand

Case 3 :Decrease Supply and Increase demand

Case4: Increase supply and Decrease demand

II Using graphs to prove

Here we will take some examples and graphs to demonstrate the factors affecting the equilibrium state

Example 1: A Change in Market Equilibrium Due to a Shift in Demand

Suppose that one summer the weather is very hot How does this event affect the market for ice cream? To answer this question, let’s follow our three steps

1 The hot weather affects the demand curve by changing people’s taste for ice cream That is, the weather changes the amount of ice cream that people want to buy at any given price The supply curve is unchanged because the weather does not directly affect the firms that sell ice cream

2 Because hot weather makes people want to eat more ice cream, the demand curve shifts to the right The graph shows this increase in demand as a shift in the demand curve from D1 to D2 This shift indicates that the quantity of ice cream demanded is higher at every price

3 At the old price of $2, there is now an excess demand for ice cream, and this shortage induces firms to raise the price As the graph shows, the increase in demand raises the equilibrium price from $2.00 to $2.50 and the equilibrium quantity from 7 to 10 cones In other words, the hot weather increases both the price of ice cream and the quantity of ice cream sold So we can come to the conclusion: As demand increases, the equilibrium price will increases, equilibrium output will increase and vice versa

Example 2: A Change in Market Equilibrium Due to a Shift in Supply

Suppose that during another summer, a hurricane destroys part of the sugarcane crop and drives up the price of sugar How does this event affect the market for ice cream? Once again, to answer this question, we follow our three steps

1 The change in the price of sugar, an input for making ice cream, affects the supply curve By raising the costs of production, it reduces the amount of ice cream that firms produce and sell at any given price The demand curve does not change because the higher cost of inputs does not directly affect the amount of ice cream consumers wish to buy

2 The supply curve shifts to the left because, at every price, the total amount that firms are willing and able to sell is reduced The graph illustrates this decrease in supply as a shift in the supply curve from S1 to S2

3 At the old price of $2, there is now an excess demand for ice cream, and this shortage causes firms to raise the price As the graph shows, the shift in the supply curve raises the equilibrium price from $2.00 to $2.50 and lowers the equilibrium quantity from 7 to 4 cones As a result of the sugar price increase, the price of ice cream rises, and the quantity of ice cream sold falls Thus we can conclude: When the supply decrease, equilibrium price will increase, equilibrium quantity will decrease and vice versa