Answer to Question #304080 in Microeconomics for Ankit

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

• When the workers get a large raise ,Raju Auto firm's cost of production increases thus the firm will be only willing to supply lower amounts of new cars.
• Introduction of a new technology will help the firm to cut down on it's cost of production thus the firm will be willing to supply larger number of automobiles.
• Subsidization of bus tickets means a reduction in demand for cars since larger population will prefer traveling by bus other than by buying their own cars.
• When real income increases, the demand for new cars also increases.
• A machinery breakdown will result to decline in amount supplied of the new cars.