Assignment Directions:
For the project, you will model and analyze a market of your choice using the theoretical methods you have learned in the class. Choose a market within an industry that interests you or one that you think you may like to work in.
The Market Description
You should write three or four paragraphs about a market. First provide the basic facts about the market: What is being produced and/or exchanged? Is this a local or global market? Where are the agents (households/individuals, firms, governments)? Who is doing the buying and selling?
Preferences and Production Description
Describe in detail the characteristics of the consumers in the market. What does demand look like? Is it elastic or inelastic? Are there obvious substitute goods available? Are there important complements? Is there decreasing marginal utility of consumption?
Write down a utility function for a typical consumer.
If your market has producers:
Describe the production process in detail. Are there high fixed costs? Are there high variable costs? What are the production inputs?
If your market involves only buyers and sellers (e.g., the residential housing market), describe as precisely as possible the rules of the market.
Market Analysis
Describe the distribution of firms and consumers in the market. Are there only a few on one side or both sides? Is there a mix of very different kinds of firms? Or consumers?
Describe any important constraints or regulations on the market.
Say something interesting about the market. Some ideas: a. How would changes in input prices affect the market equilibrium? b. Is there a policy that if implemented would improve efficiency? c. What implications would an improvement in production technology have?
