Unformatted text preview: Suppose that the bicycle maker's labour union bargains for an increase
in its wages. Further, suppose this event raises the cost of production
makes bicycle manufacturing less profitable, and reduces the quantity
supplied of bicycles by 20 units at each price of bicycles. Plot the new
supply curve and the original supply and demand curves in Exhibit 2.
What is the new equilibrium price and quantity in the market for
10 20 30 40 50 60 70 80 90
Each of the events listed below has an impact on the market for
bicycles. For each event, which curve is affected (supply or demand for
bicycles), what direction is it shifted, and what is the resulting impact on
equilibrium price and quantity of bicycles?
The price of cars increases.
Consumers' incomes decrease, if bicycles are a normal good.
The price of steel used to make bicycle frames increases.
An environmental movement shifts tastes toward bicycling.
Consumers expect the price of bicycles to fall in the future.
A technological advance in the manufacture of bicycles occurs.
The price of bicycle helmets and shoes is reduced.
Consumers' incomes decrease, if bicycles are an inferior good...
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- Fall '19
- Supply And Demand, original supply, bicycle maker's labour union bargains