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Principles of Microeconomics

7th Edition
N. Gregory Mankiw
ISBN: 9781305156050

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BuyFindarrow_forward

Principles of Microeconomics

7th Edition
N. Gregory Mankiw
ISBN: 9781305156050
Textbook Problem

Consider the market for minivans. For each of the events listed here, identify which of the determinants of demand or supply are affected. Also indicate whether demand or supply increases or decreases. Then draw a diagram to show the effect on the price and quantity of minivans.

a. People decide to have more children.

b. A strike by steelworkers raises steel prices.

c. Engineers develop new automated machinery for the production of minivans.

d. The price of sports utility vehicles rises.

e. A stock market crash lowers people’s wealth.

Subpart (a):

To determine
Demand and supply, its determinants and its effect on price and quantity.

Explanation

Figure 1 illustrates the change in equilibrium due to shift in the demand curve.

If people decide to have more children, then they would require larger vehicles for transporting their kids around. This results in an increase in the demand for minivan, while the supply curve remains unaffected...

Subpart (b):

To determine
Demand and supply, its determinants and its effect on price and quantity.

Subpart (c):

To determine
Demand and supply, its determinants and its effect on price and quantity.

Subpart (d):

To determine
Demand and supply, its determinants and its effect on price and quantity.

Subpart (e):

To determine
Demand and supply, its determinants and its effect on price and quantity.

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