Answer to Question #302985 in Microeconomics for Sahil

Question

For each of the following events, describe in words what happens to the supply, demand, quantity supplied, and quantity demanded in the market for new cars. a. The Raju Auto workers get a large raise. b. A new technology is introduced in the factory. c. The government subsidizes bus tickets resulting in a large reduction in the cost of a bus ticket. d. Real incomes grow and new cars are a normal good. e. There is machinery break down in the industry. 

Answer 1

A. Since production costs have risen for new cars, supply will shift left increasing price and decreasing quantity supplied/demanded

b) technological advances that improve production efficiency will shift a supply curve to the right. The cost of production goes down, and consumers will demand more of the product at lower prices

c) When government subsidies are implimented on bus tickets, the bus industry is able to allow it's producers to produce more of bus tickets, this increases the overall supply of bus tickets, which increases the quantity demanded of bus tickets and lowers overall price of bus tickets

d)When real income grows and new cars are normal goods, the demand rises also, overall supply also increases, quantity demanded increases, the quantity supplied also increases

e)When there is machine breakdown in a factory the supply curve will shift to the left. The cost of production goes p and consumers will demand less of a product at higher price