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Requirements
Requirements
Equilibrium Analysis
● Due Friday by 23:59
● Points 10
Assessment Details
In this task, you will apply the framework of market mechanism (topic 1) to analyze a
real case study. The task is designed to help you develop your analytical thinking of
the relative changes in market demand and/or market supply, the adjustments of
market price and market quantity and the possible market equilibrium outcome.
Assignment requirements:
You are assigned to analyze one of the following three cases of markets of
goods/services, numbered “0”, “1” and “2”. The market case assigned to you is the
one numbered by the remainder of the division of sum of the last three digits of your
student ID number by 3.
For example: a student ID number “3802655” has the last three digits “655”. The
sum of the last three digits is 16, and the remainder of 16 divided by 3 will be “1”.
This student will work with the case numbered “1”.
There will be two access links, choose the second one. Then it will require you to log
in with your RMIT Student account. When you are logged in the database, choose
the section of "Industry Research" and "China Industry Reports". Finally, search for
the industry report of the industry of tofu and bean curd production in China (code
1392).
In the sections of Industry Performance, Industry Outlook, Products and Markets and
Operating Conditions of the report, you will find more information about demand and
supply of the tofu products, the key drivers of the industry.
As learnt in the topic 1 in Prices and Markets course, you should know the market
price and output levels of a product as the outcomes of the interactions between
demand and supply of the product in the market. Producers and suppliers of the
product are concerned about the adjustments in the market price and output levels
which are the main indicators of the profitability of the producers and suppliers’
businesses (assuming the production costs of the product do not change
significantly).
Based on the knowledge you learnt in the course and the industry report, write an
economic analysis of possible adjustments in the market price and output levels of
tofu and bean curd production in China. Particularly, make sure you cover the
analytical steps below. You should start your analysis with the assumption that there
exists an initial market equilibrium and there are currently simultaneous changes of
both demand and supply of the products.
● Step 1: Analysis of the effects of the key drivers of the industry as reported
on the demand and/or supply of the tofu products through five years 2021
to 2026. For the simplicity of the analysis, you are required to analyze the
effects of three main driving factors on market supply only, (1) prices of
soybeans – the main raw materials to make tofu and bean curd, (2)
legislative quality compliance requirements and (3) the level of technology
change.
● Step 2: Evaluation of relative change in demand compared to supply of the
products. Assuming the demand of tofu and bean curd products in China
is increasing at a certain rate and based on the analysis of the effects of
the driving factors of supply in the first step above, you are expected to
give clear statements of your evaluation: whether market supply of the
products is going to change with the same or opposite direction with the
market demand and with the stronger or weaker or same rate with
demand.
● Step 3: Discussion of market condition (whether there be likely shortage or
oversupply of the products in the market in the near future, in the coming
years till 2026) and the possible adjustments in the market price and
output levels of the products, which are of the main concerns of the
producers (the Chinese manufacturers).
● Step 4: Furthermore, a theoretical argument if it is possible for the market
to adjust to a new equilibrium and comparison of new versus initial
equilibrium prices and quantities of the products (before and after the
changes) are expected in your analysis.
● Step 5: Illustration of your economic analysis by a clearly labelled graph.