Question

Consider the market for midsize cars in the United States. Make two lists: 1) factors that affect D, and 2) factors that affect S in the market for cars. Think of as many of these S and D shifters as you can, and explain each briefly.

Answer 1

Ans

1 The shift factors of demand are

A change in buyers taste=if buyers prefer other goods now demand will fall. If they prefer more cars demand will shift rightwards

B change in number of buyers=greater the no. Of buyers greater will be rightward shift in demand

C change in income=if income increases demand will shift rightwards. If it falls demand will shift leftwards

D change in prices of related goods. There i positive relationship between demand for cars and prices of related goods

E change in consumer expectations =if consume fear prices will rise in future demand will shift rightwards. If they fear prices will fall in future demand will shift leftwards

2 The shift factors if supply are

A change in resouces=if more resources are found supply will shift rightwards because resource prices fall

B change in technology =new technology decreases cost of production and thus supply shift rightwards

C change in taxes and subsidies =subsidies promote production and thus supply shifts rightwards Taxes discourage production and thus supply shifts leftwards

D change in prices of other goods=fall in prices of other goods decrease supply and increase in prices of other goods shift supply rightwards.

E change in number of suppliers=greater the number greater the rightward shift in supply

F change in expectations of producers=if they expect better demand and profits supply will shift rightwards. If they expect bad economic conditions supply will shift leftwards