Question

I NEED HELP PLEASE

Using information provided in the Washington Post article cited below, use the market model of demand and supply to evaluate how the effect of a labor shortage in the transportation industry impacts the equilibrium price and quantity in other product and service markets.

“The trucking industry shows how an extraordinary labor shortage in one corner of the economy can spill out and affect the economy more broadly. Shipping costs have skyrocketed in the United States in 2018, one of the clearest signs yet of a strong economy that might be starting to overheat. Higher transportation costs are beginning to cause prices of anything that spends time on a truck to rise. Amazon, for example, just implemented a 20 percent price increase for its Amazon Prime program that delivers goods to customers in two days. General Mills, the maker of Cheerios and Betty Crocker products, said prices of some of its cereals and snacks are going up because of an "unprecedented" rise in freight costs. Tyson Foods, a large meat seller, and John Deere, a farm and construction equipment, also recently announced they will increase prices, blaming higher shipping costs.”

Long, H. (2018). The U.S. doesn’t have enough truckers, and it’s starting to cause prices of about everything to rise. The Washington Post. https://www.washingtonpost.com/news/wonk/wp/2018/05/21/america-doesnt-have-enough-truckers-and-its-starting-to-cause-prices-of-about-everything-to-rise/?utm_term=.6ca8a267f036

Question	Answer
Does the labor shortage in the transportation industry motivate a shift in either the Demand or Supply curves in the market in other industries?
If so, how does the Equilibrium Price & Quantity in these other industries change?
Indicate the Determinant(s) of demand, and/or the Determinant(s) of supply that impact the Supply and Demand model in these other industries

Answer 1

Here in the given news in Washington Post it has been described that how a labour shortage has created a problem in transport industry. Due to labour shortage the cost of transport increased. This increase cost of transport affected the cost of selling and producing of different goods and services. Now the question given as follows-

Q.1). Does the labour shortage in the transportation industry motivate a shift in either the demand or supply curves in the market in other industries?  

The labour shortage definitely increased the cost of transportation and this increase cost of transport affected the selling of different intermediate products and final selling products. As different example has been taken like case of price increase of Amazon prime program, General Mills, Tyson Food. In every cases there was rise in cost of selling of final product or cost of production through rise in in cost of intermediary products. This increase cost of different products leads to rise in price. Due to rise in price of different goods which are directly or indirectly related to transport industry leads to fall in demand of that good. As final price of delivering the product rising it's demand will fall because consumers have to pay higher price of those goods and services due to higher transportation cost. This will actually results change in demand and demand will fall not shift. This fall in demand will be because of higher price. At the same time supply curve can shift leftward in those industry where intermediary products come through transportation. Because input cost of those industry will rise. So we are getting two cases demand curve can fall and this is change in demand and movements along the demand curve due to rise of price of final product through higher transportation cost. The supply curve can also shift leftward through rise in input cost via higher transportation cost. There can change in demand and the supply supply curve can shift left ward.

Q.2). If so, how does the equilibrium price and quantity in these other industries change?

Now if supply curve shifts leftward it results automatically rise in equilibrium price and fall in equilibrium quantity. When price rising the demand falls this movement along the demand curve. This rise in price happening because of higher cost of production and this results shift in supply towards left. So equilibrium price rises and equilibrium quantity falls.

Q)3. Indicate the determinant(s) of demand, and/or the ... in these other industries.

Actually the factor which causes a shift in supply curve is the rise in cost of input because of higher transportation cost. There will be change in demand (fall) in case of products sold by Amazon because higher price. So leftward shift in supply happening because of higher input cost via higher transport cost. The change in demand (fall in demand) happening because of higher price of own products.