Part 1: News Story

Event:
The news story I found interesting from the last week is about the surge in electric vehicle (EV) sales in Europe. According to Reuters, EV sales in Europe have doubled in the first quarter of 2021 compared to the same period last year, driven by government incentives and the push towards reducing carbon emissions. Here is the link to the news story: Europe’s electric car sales double as diesel demand falls

Part 2: Applying the Supply and Demand Model

5 Step Process:

1. Event Description: The surge in electric vehicle sales in Europe due to government incentives and the focus on reducing carbon emissions.

2. Identify Markets Affected: The electric vehicle market in Europe.

3. Shift in Supply and/or Demand: There is a shift in demand for electric vehicles as more consumers opt for environmentally friendly transportation options.

4. Impact on Equilibrium: With the increase in demand for EVs, the equilibrium price and quantity will rise.

5. New Equilibrium: The new equilibrium point will show a higher price and quantity of electric vehicles sold in the market.

Drawing the supply and demand curves by hand to illustrate the concept would provide a visual representation of the increase in demand for electric vehicles leading to a new equilibrium with higher prices and quantities.

Part 3: Evaluation of Model’s Prediction

I believe the supply and demand model’s prediction in this scenario is likely to be accurate. The surge in EV sales in Europe is driven by tangible factors such as government incentives and environmental concerns, which directly impact consumer behavior. However, there may be some issues with predicting the exact magnitude of the shift in demand and how quickly the market can adjust to meet this increased demand. Additionally, factors like battery technology advancements, charging infrastructure, and consumer preferences could also influence the market dynamics. Overall, the supply and demand model makes sense with the product chosen (electric vehicles) as it effectively captures the relationship between consumer demand and market prices, providing a framework for analyzing market trends and outcomes.