DIRECTIONS 1. Consider the market for bicycles. 2 Each of the events listed below has an impact on the market for bicycles. - For cach event, fill in the blanks as to which curve is affected (Demand or Supply). whether it will Increase or Decrease, and which factor or shifter is the reason why. Graph your answers in the market for bicycles. Then state what will happen to Price and Quantity after market reaches the new equilibrium. PROBLEMS: 1. The price of automobiles increases. a. Which curve is affected Demand * Will it increase or decrease? increase (Demand or Supply) b. What is the relevant factor or shifter? Price of Related Goods-automobiles are a substitute for bicycles c. The Demand (Demand or Supply) curve will shift right fright or left) Need to graph what you have chosen above BEFORE you can answer the rest (see below). d. Price will increase (increase or decrease) and Quantity will_increase to reach the new equilibrium. (increase or decrease) P2 PI DI Bicycles 2. Consumers' incomes decrease and bicycles are a normal good. a. Which curve is affected ? Will it increase or decrease? (Demand or Supply) b. What is the relevant factor or shifter? c. The (Demand or Supply) curve will shift (right or left) Need to graph what you have chosen above BEFORE you can answer the rest (see below). d. Price will and Quantity will to reach the new equilibrium. (increase or decrease) (increase or decrease) PI QI 3. The price of steel used to make bicycle frames increases. a. Which curve is affected ? Will it increase or decrease? (Demand or Supply) b. What is the relevant factor or shifter? c. The (Demand or Supply) curve will shift (right or left) Need to graph what you have chosen above BEFORE you can answer the rest (see below). d. Price will and Quantity will to reach the new equilibrium. (increase or decrease) (incrense or decrease) Graph Here: 4. An environmental movement shifts tastes toward bicycles. a. Which curve is affected ? Will it increase or decrease? (Demand or Supply) b. What is the relevant factor or shifter? c. The (Demand or Supply) curve will shift (right or left) Need to graph what you have chosen above BEFORE you can answer the rest (see below). d. Price will and Quantity will to reach the new cquilibrium. (increase or decrease) (increase or decrease) Graph Here: 5. Consumers expect the price of bicycles to fall in the future. a. Which curve is affected ? Will it increase or decrease? (Demand or Supply) b. What is the relevant factor or shifter? c. The (Demand or SupPply) curve will shift (right or left) Need to graph what you have chosen above BEFORE you can answer the rest (see below). d. Price will and Quantity will to reach the new equilibrium. (increase or decrease) (increase or decrease) Graph Here: 6. A technological advance in the manufacture of bicycles occurs. a. Which curve is affected ? Will it increase or decrease? (Demand or Supply) b. What is the relevant factor or shifter? c. The (Demand or Supply) curve will shift (right or left) Need to graph what you have chosen above BEFORE you can answer the rest (see below). d. Price will and Quantity will to reach the new equilibrium. (increase or decrease) (increase or decrease) Graph Here: 7. The price ofr bicycle helmets and shoes are reduced. a. Which curve is affected ? Will it increase or decrease? (Demand or Supply) b. What is the relevant factor or shifter? C. The (Demand or Supply) curve will shift (right or left) Need to graph what you have chosen above BEFORE you can answer the rest (see below). d. Price will and Quantity will to reach the new equilibrium. (increase or decrease) (increase or decrease) Graph Here: 8. Consumers' incomes decrease and bicycles are an inferior good. a. Which curve is affected ? Will it increase or decrease? (Demand or Supply) 6. What is the relevant factor or shifter? C. The (Demand or Supply) curve will shift (right or left) Need to graph what you have chosen above BEFORE you can answer the rest (see below). d. Price will and Quantity will to reach the new equilibrium. (increase or decrease) (increase or decaease) Graph Here: 9. If there is a surplus of a good, the price must be ( above / below ) the equilibrium price for that good and the price will ( rise / fall ) as market returns to equilibrium. 10. If there is a shortage of a good, the price must be ( above / below) the equilibrium price for that good, and the price will ( rise / fall ) as market returns to equilibrium. 11. The following question addresses the bicycle market when both supply and demand shift. a. Suppose there is an environmental movement that shifts tastes for bicycles AND the price of steel used to make bicycles increases. State what happens: Demand will [ increase / decrease ] Supply will [ increase / decrease ] b. What will happen to equilibrium Price and Quantity after the shifts: Hint: sketch a graph of the scenario below to answer the question. Price will increase / decrease / cannot detemine ] Quantity will [ increase / decrease / cannot determine ] Graph: