(1) Search the Internet using a search engine (such as Google) for a recent article that discusses a change in the price of something. For example, search “price increase,” “price rise,” “price drop,” or “price decrease. (I recommend you avoid articles about the stock market.) Copy the URL address of the website. You will need to post it.
(2) Determine the cause of the price change by reading the article. Then try to identify which of the theoretical demand or supply shifters discussed in Module 2 is the cause of the shift in demand pr supply, or both, which ultimately affect the equilibrium price in the model. You need to state whether demand or supply, or both, shift to the right or to the left and why. The article should suggest the cause, such as increased popularity, higher costs of production, or something similar, and you should try to figure out if that represents an increase (shift to the right) or decrease (shift to the left) of the demand or supply curves. If the article does not suggest a cause of the price change, then you MUST find another article. It is important that the article you choose allows you to identify one or more supply or demand shifters. Otherwise, the article will not be suitable for this discussion thread, and you will NOT earn maximum points on it. Keep in mind that the price change in the article should be the “effect” of a change in supply or demand, and not the “cause”. In other words you are not trying to illustrate how the law of demand or law or supply apply in the real world, but how demand shifters or supply shifters cause the equilibrium price in the model to change, and how well the supply and demand model predicts what happens to prices in the real world.
(3) After you have stated which diagram best describes the situation in your article (one in which only demand shifts, only supply shifts, or both), write a short paragraph stating what should happen to the new equilibrium price and new equilibrium quantity in the graph, when compared to the original ones. These are your theoretical model predictions. In a double shift scenario, you will find that one of the equilibrium variables either increases, decreases or stays the same, while the effect on the other equilibrium variable is certain. Otherwise, in a single shift scenario, both equilibrium variables can be predicted with certainty by looking at your graph. Last, make your final conclusions about what happens to the equilibrium price and equilibrium quantity once all possible scenarios are considered (in a double shift case). Last, keep in mind that in a double shift scenario, the effect on one of the equilibrium variables is undetermined, which corresponds to the variable that stays the same if you are using the short cut approach/scenario only. Make sure you have a good understanding of the short cut approach discussed in Module 2 before making your final conclusions and stating whether the theoretical predictions of your model match any findings/statements in the article. If this is not mentioned in the article, state that as well.
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