Question

5. Changes in the supply of sedans The following calculator shows the supply curve for sedans in an imaginary market. For simplicity, assume that all sedans are identical and sell for the same price. Two factors that affect the supply of sedans are the level of technical knowledge-in this case, the speed with which manufacturing robots can tasten bolts, or robot speed--and the wage rate that auto manufacturers must pay their employees. Initially, the graph shows the supply curve when robots can fasten 2,500 bolts per hour and autoworkers earn $25 per hour. Use the graph input tool to help you answer the following questions. You will not be graded on any changes you make to this graph. Note: Once you enter a value in a white field, the graph and any corresponding amounts in each grey hield will change accordingly. Graph Input Tool Supply for Sedans 50 20 40 Supply Price of a Sedan (Thousands of dollars) Quantity Supplied Sedans per month 225 30 PRICE Thousands of dollars) SUPPLY SHIFTERS 20 1 2500 Robot Speed (olts per hour Autoworker Wage (Dallar per hour 10 25 0 100 200 300 400 500 600 700 800 000 QUANTITY (Sedans per month) Consider the previous graph. Suppose that the price of a sedan increases from $21,000 to $20,000. This would cause the sedans to increase, which is reflected on the graph by a the supply curve Following a technological decline-for example, a decrease in the speed with which robots can attach bolts to cars- there is a the supply curve because the technological decline makes cars

Answer 1

Consider the graph, suppose the price of a sedan increases from $21,000 to $26,000. This would cause quantity supplied to increase which is reflected on the graph as upward movement along the supply curve.

Following a technological decline, a decrease in the speed with which robots can attach bolts to cars, there is a leftward shift in supply curve because the technological decline makes cars less profitable.