1.2.2 Equilibrium Stories

Instructions

For the following news articles:

Construct a supply diagram to show initial market equilibrium
Using information from the article, explain whether supply or demand has shifted.
Explain whether there would be excess supply or excess demand at the old price, after the shift you have described.
Explain what has happened to the price of the product, as an effect of the excess supply or excess demand.

Bonus: Try to explain, where possible, what the shape of the supply and demand curves will look like.

For example:

Items that are necessities will have steep demand.
Items that are difficult to increase production ill have steep supply.

Articles

Oil prices rise following Hamas attack on Israel (09 Oct 23)

Link: https://www.bbc.co.uk/news/business-67050612

Explanation: They key context is that Israel is in the middle east, a prime area for oil production. What will this increased disruption do for the supply curve for oil?

London buyers still pushing up Cotswold house prices (16 Aug 23)

Link: https://www.bbc.co.uk/news/uk-england-gloucestershire-66498511

BBC News - Rare Apple computer trainers on sale for $50,000 (25 Jul 23)

Link: https://www.bbc.co.uk/news/technology-66290382

Explanation: This is an amazing price for an old pair of shoes! When considering the equilibrium in this market don't worry about the shift in demand- just assume that the demand is very high. Model with the supply curve in a certain way to explain this high price.

Ukraine war: Wheat prices soar after Russia threatens ships (20 Jul 23)

Link: https://www.bbc.co.uk/news/world-europe-66253143

Ukraine war: Wheat prices soar after Russia threatens ships (20 Jul 23)

Link: https://www.bbc.co.uk/news/world-europe-66253143

MSCHF microscopic bag 'smaller than grain of salt' sells for $63,750 (30 Jun 23)

Link: https://www.bbc.co.uk/news/world-us-canada-66052679

Explanation: How can we explain this high price? Inelastic supply because there's just one of them? High demand because of hype?

Rent: 'We've got £1,750 a month and can't find anywhere (20 Jun 23)

Link: https://www.bbc.co.uk/news/business-65903095

Explanation: The basic point here is that rents are rising. What is happening to demand? What does supply look like in this rental market?

More pain for renters as landlords look to sell up (08 Jun 23)

Link: https://www.bbc.co.uk/news/business-65833840

Explanation: Interest rates are going up so landlords are selling their rental units- leaving those who are renting to face higher prices! Think carefully about which curve is shifting here when modelling this.

House prices in first annual fall for 11 years, says the Halifax (07 Jun 23)

Link: https://www.bbc.co.uk/news/business-65825576

Explanation: A classic fall in demand leading to lower prices- because interest rates (the price of a mortgages, a complementary product to houses) are going up.

Beach hut goes on sale with £250,000 price tag (23 May 23)

Link: https://www.bbc.co.uk/news/articles/c3gpljwwlveo

Explanation: Okay pretty wild price for a beach hut. Model the supply. Assume demand is high. Use this to explain the price.

Holiday car hire costs soar since pandemic, says Which? (12 May 23)

Link: https://www.bbc.co.uk/news/business-65566323

Explanation: This is a classic supply and demand example- demand for holiday cars has soared, but there's a limited stock. So prices can only rise.

Sainsbury's cuts own-brand bread and butter prices (09 May 23)

Link: https://www.bbc.co.uk/news/business-65531197

Explanation: A classic bit of supply and demand- wholesale prices go down, so we should expect for supply to shift right and for prices to fall. But supermarkets have their own market power- will they pass on lower costs to customers?

Explanation: An interesting one here. The boss of a big estate agent in London is saying that renting there is unaffordable (obviously). The reason is to do with a mismatch between supply and demand- a drop in number of buy-to-let mortgages available means that fewer landlords are putting property on the market- reducing supply and raising prices.

Food price rises 'worst in 40 years' says wholesaler (18 Jan 23)

Link: https://www.bbc.co.uk/news/uk-england-gloucestershire-64306671

Explanation: Pay particular attention to all the costs that are going up and mentioned in the article. And what can we say about demand for these products? How steep is it?

Warm winter may lower energy bills later this year (04 Jan 23)

Link: https://www.bbc.co.uk/news/business-64162811

Foreigners now banned from buying homes in Canada (03 Jan 23)

Link: https://www.bbc.co.uk/news/world-us-canada-64082923

Explanation: This is in response to rising house prices in Canada. Can you explain what this policy will do to equilibrium (and to prices)?

Christmas dinner cost jumps as chipolata price soars (02 Dec 22)

Link: https://www.bbc.co.uk/news/business-63809484

Explanation: A cool article which is mainly about inflation. But also consider- why are the prices of some of these food goods rising so much? And how elastic do we expect chipolatas to be following their 42.7% rise in price? Cool links across the specification.

Bargains galore in the market for office furniture (25 Nov 22)

Link: https://www.bbc.co.uk/news/business-63228999

Explanation: Great example of excess supply. Post-covid working practices mean there is no longer such demand for office furniture. So what is there is being sold at bargain prices!

BBC News - Why are global gas prices so high? (25 Aug 22)

Link: https://www.bbc.co.uk/news/explainers-62644537

The allotment firms helping to trim long waiting lists (21 Jul 22)

Link: https://www.bbc.co.uk/news/business-62220162

Explanation: A cool little article about allotments. Demand for having a plot soared during the pandemic- but there weren't enough spaces, so there were long waiting lists (excess demand). This encouraged private companies to get involved- and now more people are growing veg! Link to government vs private provision of goods/services.