Macroeconomics: What effect will each of the following have on the demand for small automobiles such as the Honda Civic or Ford Focus?A supply schedule or curve shows that, other thingsequal, the quantity of a good supplied varies directlywith its price.The supply curve shifts because of changes in (a) resource prices(b) technology(c) taxes or subsidies(d) prices of other goods(e) expectations of futureprices(f) the number of suppliers A change in supply is a shift of the supply curve; achange in quantity supplied is a movement from onepoint to another on a fixed supply curve.Questions:Small automobiles become more fashionable.The price of large automobiles rises (with the price of small autos remaining the same).Income declines and small autos are an inferior good.Consumers anticipate that the price of small autos will greatly come down in the near future.The price of gasoline substantially drops.

Answered: Small automobiles become more…

Exploring Economics

8th Edition

ISBN:9781544336329

Author:Robert L. Sexton

Publisher:Robert L. Sexton

Chapter5: Markets In Motion And Price Controls

Section: Chapter Questions

Problem 10P

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Macroeconomics: What effect will each of the following have on the demand for small automobiles such as the Honda Civic or Ford Focus?

A supply schedule or curve shows that, other things
equal, the quantity of a good supplied varies directly
with its price.
The supply curve shifts because of changes in
- (a) resource prices
- (b) technology
- (c) taxes or subsidies
- (d) prices of other goods
- (e) expectations of future
  prices
- (f) the number of suppliers
A change in supply is a shift of the supply curve; a
change in quantity supplied is a movement from one
point to another on a fixed supply curve.

Questions:

Small automobiles become more fashionable.
The price of large automobiles rises (with the price of small autos remaining the same).
Income declines and small autos are an inferior good.
Consumers anticipate that the price of small autos will greatly come down in the near future.
The price of gasoline substantially drops.

Expert Solution

Step 1

When demand for good increases, the demand curve will shift towards right and with decrease in demand the demand curve will shift towards left. Equilibrium occurs at point where demand and supply curves intersect. Surplus occurs when quantity supplied exceeds quantity demanded and shortage occurs when quantity demanded exceeds quantity supplied.

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Small automobiles become more fashionable. The price of large automobiles rises (with the price of small autos remaining the same). Income declines and small autos are an inferior good.