Determinants of Demand and Supply

ECO 101

1. 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.

b. The price of large automobiles rises (with the price of small automobiles

remaining the same).

c. Income declines, and small automobiles are an inferior good.

d. Consumers anticipate that the price of small automobiles will greatly come

down in the near future.

e. The price of gasoline substantially drops.

2. What effect will each of the following have on the supply of automobile tires?

a. A technological advance in the methods of producing tires.

b. A decline in the number of firms in the industry.

c. An increase in the prices of rubber used in the production of tires.

d. The expectation that the price of auto tires will be lower in the future than

currently.

e. An increase in the price of the large tires used for semi trucks and earth

hauling rigs (with no change in the price of auto tires).

f. The levying of a per-unit tax on each auto tire sold.

g. The granting of a 50-cent-per-unit subsidy for each auto tire produced