Question

Learning Activity 3 The following events listed below has an impact on the market for Car. For each event, which curve is affected (supply or demand for Car), what direction is it shifted, and what is the resulting impact on equilibrium price and quantity of Car? (Draw graph for each event) Questions 1. The price of car decrease in the market 2. The price of steel used to make car frames increases. 3. An environmental movement shifts tastes toward bicycling. 4. Consumers expect the price of car to fall in the future. 5. A technological advance in the manufacture of car occurs. Pearson 3 60 Copyright © 2017 Pearson Canada Inc.

Answer 1

1)price of car decrease in the market

Qs PER KAR) PRICE ($ RIGHTWARD SHIEL OF DEMAND CURVE E ay 7 OD →X QUANTVTy of CARS

# curve affected--- demand curve (QD )

( Reason---- whrn price of car decreases,there will be increase in demand as per the law of demand which states that there is an inverse relationship between price and quantity demanded ,so the demand curve will shift rightward , making equlibrium quantity and price to increase.)

# Direction of shift--- Rightward

# Resultant impact on Equilibrium price and quantity -----

Equilibrium Quantity --- increases ( from Qe to Q')

Equilibrium price ---- increases ( from Pe to p')

2)The price of steel used to make car frames increases

# curve effected-- supply curve(Qs)

( Reason-- when the input price increases, the cost of production Increases,profit of selkers also decreases ,as a result ,they will decrease the Supply of cars and this Curve shifts leftward, making equlibrium price to rise and Equilibrium quantity to Decrease)

# direction of shift--- leftward

# Resultant impact -------

On Equilibrium Quantity---- decreases from Qe to Q'

On Equilibrium price ---- increases from Pe to P'

3) An environmental movement shifts taste towards bicycling

Date ! C Page 1 Qs ♡ PRICE (& PER CARD + E & Pe LEFTWARD SHIFT OF DEMAND CURVE OD 7x O QUANTITY OF CARS

# Curve affected--- demand curve( Qd)

( Reason-- If there is a trend to use bicycles instead of cars, a substitution effect will work, peopke will replace cars with bicycles ,so the demand for cars will drcrease and demand curve will shift leftward, making equlibrium quantity and price to Decrease)

# direction of shift--- leftward

# Resultant impact on-----

Equilibrium Quantity ---- decreases from Qe to Q'

Equilibrium price ------ Decreases from Pe to p'

4) Consumers expect the price of car to fall in the future

# Curve affected --- demand curve

( Reason-- when there is an expectation that the price of car will decrease in the future, people will avoid buying it at present,so the demand for cars will drcrease presently ,as a result ,the demand curve will shift leftward,making equlibrium price and quantity to Decrease)

# direction of shift--- leftward

# Resultant impact on-----

Equilibrium Quantity --- Decreases from Qe to Q'

Equilibrium price ---- Decreases from Pe to p'

5) A Technological advancement in the manufacturing of cars occurs

# curve affected --- Supply Curve

( Reason---- when there is an improvement in technology, the cost of production decreases, the profits if producers increases, so they will increase the supply of cars,as a result ,the Equilibrium price will decrease and Quantity will increase)

# direction of shift--- rightward

# Resultant impact on-----

Equilibrium Quantity ---- Increases from Qe to Q'

Equilibrium price --- Decreases from Pe to p'

Thanks