Changes in Demand: Context Rich Problem
In this context rich problem, students must be able to identify between the difference shifts in demand and subsequent reactions to that shift in demand. Students are asked to explain a headline from the newspaper to their mother.
Context for Use
Description and Teaching Materials
It's Friday night, and you are just about to leave your room to attend a party at another dorm. However, a copy of the New York Times catches your eye. More specifically, there's an article about champagne. The article describes a successful marketing campaign by the champagne industry that changes consumers' tastes for champagne. The article notes that "many executives felt giddy about the stratospheric champagne prices that resulted. But they also feared that such sharp price increases would cause demand to decline, which would then cause prices to plunge." Just as you finish the article, your mother calls. She has read the same article and knows that you are currently taking economics, but she has never taken any economics. She wants to know if the analysis of the situation by the executives reported in the article is actually correct. In two paragraphs, construct your response to your mom.
Champagne Demand Problem (Microsoft Word 24kB Apr7 09)