Answer to Question #121024 in Microeconomics for Kainat Ijaz

Question

Consider the market for transport. For each of the events listed here, identify with the help of graphs which of the determinants of demand or supply are affected. Also indicate whether demand or supply is increased or decreased. Then show the effect on the price and quantity of transport.
a. People decide to have less children.
b. A strike by transporters.
c. Government reduces the road tax for transporters
d. Government binds the rent above the equilibrium (e.g., set price floor above the equilibrium).

Answer 1

when people decide to have less children the demand for cars will reduce and in this case demand is affected.

A strike by transporters in this case supply will not be affected due to transporters strike,Demand will be affected resulting in higher prices for the products.

when government reduces taxes this policy is more likely to affect supply such as infrastructure will be highly affected since taxes will be not enough in construction of feeder roads.below is a graph for tax reduction.

when government binds rent above equilibrium the intersection of demand (D) and supply (s) would be at the equilibrium point E_O. when a price floor which is set at pf holds the price above Eo and prevents it from falling what is excess is supply in this case thus demand is affected since the quantity supplied Q_S exceeds the quantity demanded Q_D. below is a graph will illustrates

The effect of price and quantity in transport

when a car is an example in this case.increased demand at every given price affects the quantity demanded to be higher from this case the demand curve shifts from D_O to D_1.

when demand increases at every given price,the quantity demanded seems to be lower and this makes the demand curve to shift to the left from D_O to D₁. Below is a graph