Managerial Economics
Activity Instructions
Answer in complete and grammatically correct sentences. I am looking for your thought process in the answers to the questions, so be complete in your answers and use the opportunity to clearly demonstrate your knowledge.
Scenario 1 (length: as needed)
Consider the market for corn in the United States. Suppose that the mandated percentage of ethanol in gasoline is increased and at the same time a corn blight destroys a significant portion of the corn crop.
1. Using a supply and demand diagram, show what happens to the equilibrium quantity and price of corn in the United States.
2. Explain why you are moving the curve(s) that you are?
3. Using a supply and demand diagram, show how the changes in the corn market would affect the market for wheat (a substitute for corn).
Scenario 2 (length: one paragraph)
Review the following resources:
•Website: https://research.stlouisfed.org/fred2/series/SPCS20RSA?cid=32261
•Website: https://research.stlouisfed.org/fred2/series/HSN1F
During the housing crash in 2008, housing prices fell, and the number of new houses sold in the United States also fell. The link to “New One Family Houses Sold” does not include existing house sales, but assume that existing house sales fell as well. Using the supply and demand analysis, would the observations of the housing market be explained by a shift of the demand curve, the supply curve, or both? Would the demand and supply increase, decrease or remain the same?
Scenario 3 (length: 0.5 page)
A pet store is considering adding an employee discount of 25% off anything in the store to the benefits the employees already receive. What are the long-run implications of adding this benefit to the wages that its employees receive? What would happen to the type of applicants that the pet store attracts?
Writing Requirements
•Length: as indicated (Show your calculations where appropriate.)
•Double spaced
•12-point Times New Roman font
Grading and Assessment
This activity will be graded based on thoroughness and correctness of responses. For the numerical and graphical questions, to achieve full marks you must also show your work.
1. Master the basic techniques of microeconomic analysis such as demand, supply and equilibrium; production and cost theory; and market structure and pricing.
2. Apply economic reasoning to understand and improve managerial decision-making and grasp the analytical foundations underlying a firm’s competitive strategy.
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