1569776858214328709690514454711.jpg - Suppose that the...

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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 bicycles? Exhibit 2 Price E800 700 600 500 400 300 200 100 0 10 20 30 40 50 60 70 80 90 Quantity 2. 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? a The price of cars increases. b. Consumers' incomes decrease, if bicycles are a normal good. C. The price of steel used to make bicycle frames increases. d. An environmental movement shifts tastes toward bicycling. e Consumers expect the price of bicycles to fall in the future. F. A technological advance in the manufacture of bicycles occurs. g. The price of bicycle helmets and shoes is reduced. h. Consumers' incomes decrease, if bicycles are an inferior good...
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