Supply Increases Price

Homework Week 23. What effect will each of the following have on the demand for small automobiles such as the Mini Cooper and Smart car?a. Small automobiles become more fashionable This will increase the demand in small automobilesb. The price of large automobiles rises (with the price of small autos remaining the same) The demand will increasec. Income declines and small autos are an inferior good. The demand will increased. Consumers anticipate that the price of small autos will greatly come down in the near future. The demand will decreasee. The price of gasoline substantially drops This statement is unclear. You can’t really tell if the demand for small automobiles will increase or decrease just because the gas prices drop substantially.6. What effect will each of the following have on the supply of auto tires?a. A technological advance in the methods of producing tires. Supply will increaseb. A decline in the number of firms in the tire industry. Supply will decreasec. An increase in the price of rubber used in the production of tires. Supply will decreased. The expectation that the equilibrium price of auto tires will be lower in the future than currently. Supply will increasee. A decline in the price of large tires used for semi-trucks and earth hauling rigs (with no change in the price of auto tires). Supply will increasef. The levying of a per-unit tax in each auto tire sold. Supply will increaseg. The granting of a 50-cent-per-unit subsidy for each auto tire produced. Supply will increase9. How will each of the following changes in demand and/or supply affect equilibrium price and equilibrium quantity in a competitive market; that is, do price and quantity rise, fall or remain unchanged, or are the answers indeterminate because they depend on the magnitudes of the shifts? Use supply and demand diagrams to verify your answers.a. Supply decreases and demand is constant Price goes up and quantity goes downb. Demand decreases and supply is constant Price goes down and quantity also goes downc. Supply increases and demand is constant Price goes down and quantity upd. Demand increases and supply increases Price is indeterminate and the quantity goes upe. Demand increases and supply is constant Price goes up and quantity upf. Supply increases and demand decreases Price goes down and the quantity is indeterminateg.Demand increases and supply decreases Price goes up and the quantity is indeterminateh. Demand decreases and supply decreases Price is indeterminate and the quantity goes down11. Critically evaluate: â€Å"In comparing the two equilibrium positions in figure 3. 7a, I see a larger amount is actually purchased at a higher price. This refutes the law of demand† The increase in demand from D1 to D2 increases both equilibrium price and equilibrium quantity. On the second equilibrium we can see that demand has increase causing buyers to buy more at higher prices than the first equilibrium.