Economics.Consider the market for mini-vans.

Question

For each of the events listed here, identify which of the determinants of demand and supply are affected. Also indicate whether demand or supply is increased or decreased

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 mini-vans

d) The price of station wagons rises

e) A stock market crash lowers people’s wealth

Answer 1

a) People decide to have more children

Demand for mini-vans increases.

b) A strike by steelworkers raises steel prices.

Higher costs of steel increase the cost of mini-vans and hence reduces the supply of mini-vans.

c) Engineers develop new automated machinery for the production of mini-vans.

This decreases the cost of mini-vans and hence increases the supply of mini-vans.

d) The price of station wagons rises.

The demand for mini-vans increases as some drivers switch from station wagons to mini-vans.

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

Lower wealth lowers the demand for mini-vans.