ECON 100 Fall 2021 Assignment 5: Market Answer the following questions in the spaces below. You may hand write this assignment but please write legibly. This assignment is to be completed individually. 1. (14 points) Use the table below to plot the supply and demand curve for tutoring. Be sure to label the supply curve with an S and the demand curve with a D. (2) Use the supply and demand curve to answer the questions below. Price Quantity Supplied Quantity Demanded (Hours per Semester) (Hours per Semester) 50 148 5 45 140 8 40 130 11 35 114 16 30 90 22 25 62 30 20 39 39 15 20 47 10 10 57 Price Quantity 1. What is the equilibrium price and quantity? Write your answer below. Label it on the graph with a P1 and Q1. (2) 2. If the price in the market is $25, explain whether there is a shortage or a surplus. How do you know? How much is the shortage or surplus? What will the shortage or surplus do in the market for tutoring?(4) 3. At a quantity of 16 hours per semester, at what price are tutors willing to sell? At what price are students wiling to pay for tutoring? (2) 4. Suppose that income increases causing the amount that students are willing and able to buy to increase by 10 hours at each price level. Draw the new demand curve. (2) 5. What has happened to the equilibrium price and quantity? Write your answer below. Label it on the graph with a P2 and Q2. (2) 2 . (10 points) Read the CTV News Article: https : Hm . ctvnews . ca/autos/used- car-prices-in-canada- 5545158. Use that information to answer the following questions. 1. Explain why the price of new cars are rising. What is changing supply or demand or both? What determinant(s) are causing the change? (4) 2. Draw a supply and demand curve. You do not have to know actual prices or quantities. Label the equilibrium price P1 and the equilibrium quantity Q1. (2) Pce Quantity 3. On the same graph, show why prices are rising by shifting supply, demand, or both. Label the new equilibrium price P2 and the new equilibrium quantity Q2. (2) 4. What has happened to the market price and number of goods sold in the market for new cars? (2) 3. (12 points) According to the same news article, determine what is happening in the used car market. 1. Explain why the price of used cars are rising. What is changing supply or demand or both? What determinant(s) are causing the change? (4) 2. Draw a supply and demand curve. You do not have to know actual prices or quantities. Label the equilibrium price P1 and the equilibrium quantity Q1. (2) Price Quantity 3. On the same graph, show why prices are rising by shifting supply, demand, or both. Label the new equilibrium price P2 and the new equilibrium quantity Q2. (2) 4. What has happened to the market price and number of goods sold in the market for used cars? (2) 5. How are the new car and used car markets related? (2) 4. (12 points) According to the same news article, determine what is happening in the rental car market. 1. Explain why the price of rental cars are rising. What is changing supply or demand or both? What determinant(s) are causing the change? (4) 2. Draw a supply and demand curve. You do not have to know actual prices or quantities. Label the equilibrium price P1 and the equilibrium quantity Q1. (2) Price IIIlIlllllIlIIlIlIllIIIllIIll Quantity 3. On the same graph, show why prices are rising by shifting supply, demand, or both. Label the new equilibrium price P2 and the new equilibrium quantity Q2. (2) 4. What has happened to the market price and number of goods rented in the market for rental cars? (2) 5. How are the new car and rental car markets related? (2) TORONTO The average price of a used car has continued to rise. with no end in sight to the ongoing pandemic-induced shortage of microchips. Data from AutoTraderca. an online used car marketplace with over 460.000 listings. shows that the average used car in July 202] listed on its platform was $28,736. That's up I2.8 per cent compared to the average price from the same time last year. which was $25,470. Related Stories "We obviously . Pattie Lovett-Reld: You sold your car during the pandemic now what? have 0 mt Of . The chipmaking factory of the world is battling COVID-W and the climate crisis data bUt we - 'Perfect storm' of chip shortage. soaring demand pushes used car prices to new highs hUVe OUI' own . Global chip shortage affecting game console stock. auto manufacturing price index. and ~ Tenn. Nissan plant to close for 2 weeks due to chip shortage we've been 'Carpocalypse' comes to Canada as vehicle shortage hits car rental industry looking at prices to understand what's happening in the market." said Baris Akyurek. AutoTroclerca's director of marketing intelligence. in a phone interview with CTVNews.ca on Thursday. The shortage of microchips has led to fewer new cars being manufactured. Fewer new cars forces more consumers to buy used. which in turn. drives up the prices of used cars. It's a trend that hasn't showed any signs of slowing since the beginning of the year. In January. used cars prices were up I] per cent compared to January of last year. A surge in pickup truck popularity has also led to skyrocketing prices for used pickups. Akyurek says that the average price of a used pickup truck is up 27 per cent in July 202] compared to the same time last year. HOW THE CHIP SHORTAGE AFFECTS CAR PRICES In the early months of the pandemic. car sales declined as people were beginning to work from home and holding off on big purchases. given the economic uncertainty. Akyurek says demand for cars soon rebounded as pandemic-related fears pushed people away from using public transportation or ride-hailing services. Many Canadians also had more money in their savings accounts thanks to the pandemic. Statistics Canada found that in the second quarter of 2020. Canadian households were saving 28.2 per cent of 12 9f23f2021, 2:05 PM Jsed car prices in Canada up 12.8 per cent from last year as microchip sh... https:a'lwww.ctvnews.cafarumsfused-car-prices-in-canada-up-lZ-S-per-cent... of their disposable income. In the taurth quarter of 2019. the household savings rate was 3.6 per cent. "We beiieve. the fact that there's a decline in interest in public transportation and ride sharing services. as well as the fact that now Canadians have more savings in their accounts... this all created this pentsup demand." said Akyurek. of their disposable income. In the fourth quarter of 20l9. the household savings rate was 3.6 per cent. "We believe. the fact that there's a decline in interest in public transportation and ride sharing services. as well as the fact that now Canadians have more savings in their accounts... this all created this pentnup demand." said Akyurek. But microchip manufacturers have been unable to respond to the surge in demand. Peter Frise. who is the executive director of the Centre for Automotive Research and Education at the University of Windsor. says that modern automobiles can have hundreds of microchips that control everything from the air conditioning to the power steering system. "There's a constant need for revision and updating. and so on. And that means that the supply of chips. has to be steady and constant. and constantiy updated." Frise told CTVNews.ca in a phone interview on Tuesday. "If supply is interrupted. it basically messes up the supply of the car. You can't sell a car to a customer where. let's say. the air conditioning doesn't work because it doesn't have a certain chip." It's unclear how long these shortages could last. The CEO of Taiwan Semiconductor Manufacturing Corporation. which is the world's largest chipmaker. told investors in April that the chip shortage may not ease until 2023. "I would say that it will make a big impact on the entire 202] and 2022 production." said Frise. "Most auto plants are shifting over to next year production. So. the cars they're building right now are. for the most DCll't. 2022 models." If you're shopping fora car now and can't wait for the prices to come down. Akyurek says it's still possible to find a good deal with extensive comparison shopping. This may mean driving to another city in order to score a deal. "There's still tons and tons of vehicles with great deals to be had." he said. SHORTAGE ALSO IMPACTING CAR RENTAL AGENCIES Rental car agencies have also had a tough time getting their hands on vehicles. at a time when eased COVlD-19 restrictions across the country have led to more Canadians planning getaway journeys. Many rental car locations across Canada have been completely sold out for weeks in advance. And at locations where cars are available. prices can start at upwards of $l20 a day for the smallest class of car. Craig Hirota. who is the Associated Canadian Car Rental Operators' vice-president of government relations and member services. estimates that the car rental industry has around l5 to 20 per cent fewer cars in the fleet compa red to the summer of 2019. "We can't get cars at the volumes we would need. so there's right now a temporary supply issue in terms of rental cars. compared to the available demand." Hirota told CTVNews.ca over the phone on Tuesday. Car rental operators have had to get creative in orderto find enough vehicles. l-lirota says some have been scouring wholesale auctions for used cars with low mileages. Others are keeping their cars in service for longer than normal. "They're basically trying to get cars any way they can. because it doesn't really do our industry any good to turn away customers. So. we definitely want to try and satisfy customer demand." If you're looking to book a rental car. Hirota suggests planning as far ahead as possible and comparing prices between different locations and companies. "Call as many different rental car locations as you can find. Not everybody is going to have the same vehicle availability so you may be able to find a vehicle from a car rental operator that you're not as familiar with. but you just have to do a little bit of searching." RELATED IMAGES In this June 26. 2018. file photograph. a used 2017 Chevrolet Cruze sits in a row of other used. late-model sedans at a dealership in Centennial. Colo. (AP Photo/David Zalubowski. File)