Date: October 5, 2012
From: Erik Davis
Subject: Project Part 2 Entrepreneur Edward
I have completed my research and analysis for Entrepreneur Edward’s needs. My findings are provided below.
Event 1 - An increase in income (assuming that his ice cream is “normal” goods). If consumer income increases for any reason, the demand for the ice cream is likely to increase, or shift to the right, causing equilibrium price to rise.
Event 2 – An increase in the number of potential consumers in the market. If for some reason the number of people buying the ice cream increases, for instance if your product is available in a new area because a new grocery store opens, the demand for the ice cream would increase, or shift to the right, increasing the equilibrium.
Event 3 – A decrease in the number of firms offering the ice cream. If some of the other ice cream manufacturers were to go out of business, or for some other reason drop out of the market, there would be a decrease in competition among the sellers allowing them to raise their prices. The supply curve would decrease, or shift to the left, causing the equilibrium price to increase.
Event 4 – An increase in the cost of an input. An increase in the cost of production of the ice cream would force the company to charge more for their product since it costs more for them to make. This would decrease the supply for the product shifting the supply curve to the left and increase the equilibrium price.
Event 5 - Any time demand increases, or shifts more to the right, than supply does. If both the demand and supply shift in any case that the demand increases more than the supply does the equilibrium price will increase.