Question

Show on a graph an appropriate shift in either supply or demand of skateboards, a normal good, for each of the following scenarios. Write the supply or demand shifter that applied next to your graph

e. The price of skateboards increases (demand)

f. The price of ball bearings, an input for skateboards, increases

g. Skateboard producers can make either skateboards or in-line skates. An increase in demand causes the price of in-line skates to increase

h. Amid recession, average family incomes decrease

Answer 1

Amswer:

a. When the price of skateboards increases from P to P1, the equilibrium point moves along the demand curve. The quantity demanded decreases from Q to Q1.

  

b. With the increase in the price of an input, supply decreases. The supply curve shifts inward, to the left from S to S1. Price increases to P1 and quantity decreases to Q1.

  
  

c. When price of in-line skates, a substitute, increases (for whatever reason), the demand for skateboards increaes. The demand curve shifts outward, to the left, indicating an increase in both price and quantity.

d. When income decreases, demand decreases. Demand curve shifts to the left, indicating a decrease in both quantity and price.