Answer to Question #302989 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) When workers get a large raise, the supply will increase, demand will fall, quantity supplied will increase and the quantity demanded reduce.

(b) When new technology is introduced into the factory, the supply will be low because workers will be taking time to adapt to new technological development, demand will be high, quantity supplied will be low, and quantity demanded will be high.

(c)The subsidy to the bus ticket will increase supply, demand will also rise, quantity supplied will reduce and the quantity demanded will increase.

(d) When income grows, supply will be low, quantity supplied will be low and the quantity demanded will be high.

(e) When there is machinery in the factory, the supply will be low, demand will be high, quantity supplied will be low and quantity demanded will be high.