Supply and Demand Graph and Analysis

Module 02 Content

1. • Explain supply and demand mechanics and market failures.

   You are a junior executive of a new cellular phone carrier called Technologies of the Future (TOF) that competes in the same market as Verizon Wireless, AT&T, and T-Mobile. You have been asked to analyze supply and demand, market equilibrium, and market shortages and surpluses to determine the optimal price for TOF to charge for a phone. The task at hand is to graph the supply and demand curves in Excel using the values given below.

4. Your graph must be properly constructed; please use a scatter graph with markers or a scatter graph with smooth lines. The graph should include a chart title, x-axis, y-axis, and contain a properly labeled equilibrium point.

   • Identify the firm’s equilibrium price and quantity in the market.
   • Draw on your graph a price ceiling and a price floor and discuss what those terms mean. Explain which government-mandated price would result in a market shortage and a market surplus and why?
   • Calculate market shortages and market surpluses given the values from the graph based on the prices provided in the Price.docx. Be sure to define a market shortage and a market surplus.
   • Identify and discuss the price TOF should charge for its cellular phones.
   • Describe potential market failures that TOF could experience as a result of government policies.