Chapter 4 Homework Answer Keys

Chapter 4 Homework Answer Keys - Supply is not affected....

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Chapter 4 Homework Answer Keys 3. a. If people decide to have more children, they will want larger vehicles for hauling their kids around, so the demand for minivans will increase. Supply will not be affected. The result is a rise in both the price and the quantity sold, as Figure 1 shows. Figure 1 b. If a strike by steelworkers raises steel prices, the cost of producing a minivan rises and the supply of minivans decreases. Demand will not be affected. The result is a rise in the price of minivans and a decline in the quantity sold, as Figure 2 shows. Figure 2 c. The development of new automated machinery for the production of minivans is an improvement in technology. This reduction in firms' costs will result in an increase in supply. Demand is not affected. The result is a decline in the price of minivans and an increase in the quantity sold, as Figure 3 shows. 1
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Figure 3 d. The rise in the price of sport utility vehicles affects minivan demand because sport utility vehicles are substitutes for minivans. The result is an increase in demand for minivans.
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Unformatted text preview: Supply is not affected. The equilibrium price and quantity of minivans both rise, as Figure 1 shows. e. The reduction in peoples' wealth caused by a stock-market crash reduces their income, leading to a reduction in the demand for minivans, because minivans are likely a normal good. Supply is not affected. As a result, both the equilibrium price and the equilibrium quantity decline, as Figure 4 shows. Figure 4 2 14. a. As Figure 5 shows, the supply curve is vertical. The constant quantity supplied makes sense because the basketball arena has a fixed number of seats at any price. Figure 5 b. Quantity supplied equals quantity demanded at a price of $8. The equilibrium quantity is 8,000 tickets. c. Price Quantity Demanded Quantity Supplied $4 14,000 8,000 $8 11,000 8,000 $12 8,000 8,000 $16 5,000 8,000 $20 2,000 8,000 The new equilibrium price will be $12, which equates quantity demanded to quantity supplied. The equilibrium quantity remains 8,000 tickets. 3...
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Chapter 4 Homework Answer Keys - Supply is not affected....

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