Answer to Question #228732 in Economics of Enterprise for joker

Question

For each of the following statements, draw a diagram that illustrates the likely effect on the market for Toyota cars. Indicate in each case the impact on equilibrium price and equilibrium quantity with full explanation.

a. A Mechanic Engineer warns that new Toyota cars overheats during long journeys.

b. The price of rubber which is used to produce tyres reduces.

c. A fall in the price of Nissan cars.

d. A rise in bus tariffs .

e. A successful advertising of Toyota cars.

Answer 1

a) The overheating will lead the demand to decrease as the supply continues increasing, hence a fall in equilibrium price. However, the effect cannot influence equilibrium quantity.

b) when the rubber price reduces, the company may choose on decreasing their price and increase the supply. This increase equilibrium quantity and reduces equilibrium price.

c) A fall in price makes the Equilibrium price to decrease.