Question

1. Problems and Applications Q1 Show the change in the market for restaurant meals that is consistent with the following statement: "When an economic boom raises people's income, the price of restaurant meals rises." Sup Demand Supply mand Quantity of Restaurant Meals Show the change in the market for electric cars that is consistent with the following statement: "When the price of electric cars is expected to rise in the near future, the current price of electric cars rises."

Answer 1

Suppose that income of the people raises. People will increase the demand for restaurant meals. This increases the demand from Demand to Demand 1. This increases the price of restaurant meals. The following figure is showing the effect. Now, suppose that the price of electric is expected to rise in the near future. The price expectation affects the demand and supply curve. If the sellers expect the higher prices in the future, they will decrease their supply in present and increase their supply in future. This shifts the supply to the left If the buyers expect the higher prices in the future, they will increase their demand in present and decrease their demand in future. This shifts the demand to the right This increases the current price of electric car The following figure is showing the effect. \r\n Suppose the war breaks out in the middle east. This will disrupt the supply of oil. This will decrease the supply by shifting from supply to supply 1