Answer to Question #264339 in Microeconomics for shi

Question

Consider the market for minivans. For each of the events listed here, identify which of the determinants of demand or supply are affected. Also indicate whether demand or supply increase or decrease. Then draw a diagram to show the effect on the price and quantity of minivans.

a.People decide to have more children

b.A strike by steelworkers raises steel price

c.Engineers develop new automated machinery for the production of minivans

d.The price of sports utility vehicles rises

e.A stock-market crash lowers people's wealth

Answer 1

 

 

Answer: 

a.  People decide to have more children.

-The Demand Increases (shift toward the right). The price (P) increases as the quantity (Q) increases too.

 

 

b.  A strike by steelworkers raises steel prices

-Supply decrease (a shift toward the left). The price increases (P) as the quantity (Q) decrease.

 

 

c.  Engineers develop new automated machinery for the production of minivans. Supply increase (shift towards the right). The price decreases as the quantity increase.

 

 

d.  The price of sports utility vehicles rises.

-Demand Increase (a shift toward the right)

- If sports utility vehicles are substitutes for minivans.

The price and quantity both increase.

 

 

e. A stock market crash lowers people’s wealth.

- Demand, decrease (shift toward the left). Both price and quantity decrease.