Answer to Question #307513 in Microeconomics for Flavias

Question

Q1.

Draw a diagram showing the effects of an increase in the price of bus journeys on the equilibrium market price and output in the weekly market for e-scooters in the UK. 

Q2.

Referring to your diagram for Q1, fully explain what happens to the equilibrium market price and output of e-scooters.

 

Q3.

Draw a diagram showing the effects of a decrease in the wage rate of bricklayers on the equilibrium market price and output in the annual market for new houses in France.

 

Q4.

Referring to your diagram for Q3, fully explain what happens to the equilibrium market price and output of new houses.

Answer 1

Q1

Q2

The increase in prices of bus journeys will lead increase in demand for e-scooters because they have substitute relationships. The demand curve will shift to the right, equilibrium price rises from P_O to P₁ while the equilibrium quantity increases from Q₀ to Q₁.

Q3.

Q4.

A decrease in the wage rate of bricklayers causes employers to hire a larger number of workers. This in turn causes an increase in the quantity of labor demanded, resulting in a shift in the demand curve to the right. Hence, the equilibrium market price and output in the annual market for new houses in France are shown by the graph drawn above. Both price and quantity demanded will decrease causing a decrease in the equilibrium market.