1) For each of the following situations, draw a graph showing the shifts of the curve, explain the reason for the shift(s), and the effect on the equilibrium price and quantity in the market for bicycles.

a) The price of automobiles increases. (6 points)

b) Consumers' incomes decrease at the same time the price of steel used to make bicycle frames increases. (6 points)

c) An environmental movement shifts tastes toward bicycling. (6 points)

d) A technological advance in the manufacture of bicycles occurs at the same time the price of bicycle helmets and shoes falls. (6 points)

2) A tax on shoe sales that requires the dealer to pay a $2 tax on every pair of shoes sold should not concern consumers because the dealer has to pay the tax. Evaluate this statement. (2 points)