Discussion on Demand and Supply

Part 1: This assignment requires you to show the connection between vehicle sales and current income (Gross Domestic Product) using real data.

a) Plot the vehicle sales and Gross Domestic Product in the same diagram and embed the graph in your reply:

-Go to the following website: https://fred.stlouisfed.org (Links to an external site.)Links to an external site..

-First plot the following data series: Total Vehicle Sales, Millions of Units, Seasonally Adjusted Annual Rate. (Hint: use the Search box in the front page).

-After plotting the data, edit the data series by choosing the frequency “Quarterly”. (Click on the orange “Edit Graph” button on the right upper corner. Then select “Quarterly” from the “Modify frequency” drop-down list.)

-Also, concentrate on looking at the last 15 years (2002-2017). You can adjust the years in the boxes located right above the graph.

– Next, add the second data series “Gross Domestic Product” by clicking on “Edit Graph” > “Add Line” and typing “the Gross Domestic Product” (choose series Gross Domestic Product, Quarterly, Billions of Dollars, Seasonally Adjusted Annual Rate).

– Modify this data series by choosing “Units: Percent Change”.

– Finally, change the Y-axis position to the right for the second data series by clicking “Edit Graph” > “Format”, and change the Y-axis position for line 2 to be “right”.

You should now have a graph showing the connection between Vehicle Sales and Gross Domestic Product. Embed your diagram to your reply by clicking on “Share Links” under the graph, then choosing “Embed in website”, and copying the embed code. Then go to your discussion post, click on “Insert/Edit Media” > “Embed”, paste your code and click on “Ok”. (max. 1 point)

b) As the vehicle sales series reports total vehicle sales, it represents the number of vehicles bought and sold in the market at each point in time, and thus it can be interpreted as a point on the demand curve. The Gross Domestic Product can be interpreted as the current income in the economy. By looking at your graph, what is the relationship between the vehicle demand and the current income? How do the total vehicle sales and the percent change in GDP move over time? In the same or in opposite directions? (max. 1 point)

Part 2:

Now assume that current income of households increases, and at the same time the prices of iron and steel decreases. Assume also that the new equilibrium quantity for vehicles increases and the new equilibrium price decreases. Use DrawIO to show in the supply-demand framework how supply and demand curves would shift under this scenario. Carefully label everything in your diagram (axes, original supply and demand curves, new supply and demand curves, original price and quantity in the equilibrium, new price and quantity in the equilibrium), and explain your answer (max. 2 points)

Here are instructions how to embed you DrawIO diagram into Canvas: (Links to an external site.)Links to an external site.DrawIO info for Canvas (Links to an external site.)Links to an external site. and Additional DrawIO info (Links to an external site.)Links to an external site.

Provide feedback on someone else’s reply. (max. 1 point)

Link to DrawIO: DrawIO (Links to an external site.)Links to an external site.