Global Economic Policy Council

Strawberries: A Second Helping

Examine the Market From the Producer and Consumer Side

SCENARIO

The Council’s market analysts have produced additional data regarding the market for strawberries:

Market Supply and Demand

New Strawberries
Price per Quantity Quantity
Bushel ($) Demanded Supplied
(in thousands) (in thousands)
30 10 130
25 30 110
20 55 90
15 75 75
10 100 50
5 130 25

The above table is a market demand and supply schedule for strawberries. The Council and the
country would like your help in interpreting it. In addition, the government is seeking your advice on a new
law they are considering to regulate the strawberry market.

Your Mission

1. Review Chapters Five and Six.

2. Evaluate the economic concept of supply. Examine supply curves and determine what makes
them shift. Review the interaction of supply and demand.
3. Complete the following tasks:
a. Using the market data presented to you, create a graph which depicts the supply and
demand for strawberries on the same graph. Be sure to properly label your horizontal
axis and vertical axis.
b. Based on your graph, determine the price at which the strawberry market reaches
equilibrium and depict it on your graph.
c. For each of the following hypothetical economic events, determine whether the event
will affect the supply OR the demand for strawberries and whether that effect will be
positive or negative. Graph the changes in demand and supply on your graph.
1. The number of farmers who are growing strawberries has increased.
2. The price of the fertilizer used to grow strawberries has increased.
3. The emergence of new agricultural machinery has made it easier for
farmers to grow strawberries more efficiently.
d. The government is considering a new law that would set a “price ceiling” on
strawberries of $10 per bushel. In other words, the law would require that strawberries
 not be sold to consumers for more than $10 per bushel. The government is hoping that
the mandated price decrease will allow more of its citizens to afford strawberries.
i. Write a one to two paragraph letter analyzing this policy. Your letter must
address the following:
1. How will this price ceiling affect the quantity supplied and quantity
demanded of strawberries? How will strawberry producers react? How
will strawberry consumers react?
2. Will there be a strawberry surplus or shortage? What will be the exact
amount of that surplus or shortage? Show the effect of the price ceiling
on your graph.
3. Given the economic implications of the price ceiling law, do you think
this is a good policy for the government to enact? Will the policy
achieve what they are trying to accomplish? What are some of the
possible consequences?

Grading Rubric – This assignment is worth 100 points.

Supply and Demand Short Answer Response Support (10 pts) Mechanics (10 pts)
Graph (35 pts) (45 pts)

Supply and demand graph Student builds on fact Information was used Short answer
accurately depicts the with deeper insight and from the course content response is written in
market data for personal perspective or other reputable complete sentences
strawberries sources

Student explains the Letter is at least one

Graph the negative and effect of a price ceiling to two paragraphs
positive changes in supply and its implications (with 5 – 8 sentences
and demand per paragraph)

Includes ample facts

Equilibrium is marked on Student used proper
graph grammar and
punctuation

Horizontal and vertical

axis are properly marked