If in the automobile markets we know that two SUV brands, Z and X, are substitutes....

If in the automobile markets we know that two SUV brands, Z and X, are substitutes. Suppose that the supply of X decreases and, at the same time, the supply of the Z increases. Other things being equal, what would be the expectations for the change in the equilibrium quantities at the two markets?

Question 16 options:

	The equilibrium quantity of Z will increase and the equilibrium quantity of X will remain the same.
	The equilibrium quantity of Z will increase and the equilibrium quantity of X will decrease.
	The equilibrium quantity of X will increase and the equilibrium quantity of Z will decrease.
	The equilibrium quantity of X will increase and the equilibrium quantity of Z will remain the same.

Solutions

Expert Solution

As we know substitute goods are those goods which can be used in place of one another . Here we have two substitute goods , Z and X . Now if the supply of x decreases, this means that in the market demand for x exceeds it's supply . This will lead to rise in the prices of good . So now due to higher prices , consumer starts to demand less X , as it's cheaper substitute Z is avaliable for the consumer . So consumer starts buying Z instead of X as Z is more cheaper to them and X and Z are substitute of each other . Now we know at a same time supply of Z also rises , so simultanous rise in demand and supply will lead to rise in equilibrium quantity for Z , and equilibrium quantity of X will fall due to shifting of it's customer base towards X .

Hence (B) part is a correct answer

Rahul Sunny answered 2 years ago

Next > < Previous

Related Solutions

In the soda market we know that Pepsi Cola and Coca Cola are substitutes; suppose that...

In the soda market we know that Pepsi Cola and Coca Cola are substitutes; suppose that the demand for Pepsi Cola increases and, at the same time, the supply of the Coca Cola decreases significantly. Other things being equal, what would be the expectation of change in the Coca Cola market, if any? Question 15 options: The equilibrium quantity is expected to increase while the direction of the change in the equilibrium price is ambiguous. The equilibrium quantity is expected...

Use two different ways to prove X Y + Z = (X + Z)(Y + Z)....

Use two different ways to prove X Y + Z = (X + Z)(Y + Z). a) Use pure algebraic way b) k-maps

Hint: For z-scores with a magnitude greater than 3.8, we know from the z-table that the...

Hint: For z-scores with a magnitude greater than 3.8, we know from the z-table that the probability of a random case or sample mean being further from the population mean is less than .0001. This is true if z is 3.9, -4, or 24. Basically, if a case is that much of an outlier, it’s really unlikely 1. In Wisconsin in 2014, there was a mean of 1128.8 injury-related emergency room visits per day (population mean), with a standard deviation...

You are assisting the management accountant with sales forecast of two brands – Y and Z...

You are assisting the management accountant with sales forecast of two brands – Y and Z – for the next three quarters of 2019. Brand Y has a steady, increasing trend in sales of 2% a quarter and Brand Z a steadily falling trend in sales of 3% a quarter. Brand Y are subject to seasonal variations as a proportion to the sales units as follows: Quarter 1 2 3 4 Seasonality -30% 0% -30% 60% Brand Z however is...

suppose a regression model has two explanatory variables (x and z). If we add a new...

suppose a regression model has two explanatory variables (x and z). If we add a new variable to to the model (m), and this new variable is correlated to x and z, how would we use the new variable m to test the impact of variable x on our dependent variable y when z and m remain the same?

If for we know or then we can conclude that (Its a multiple choice): a. x...

If for we know or then we can conclude that (Its a multiple choice): a. x = c is a possible cryptic value on the graph of f (x) b. x = c is a possible inflection point on the graph of f (x) c. x = c is an inflection point on the graph of f (x) d. x = c is a critical value on the graph of f (x)

True or false: If two consumers both view X and Y as perfect substitutes and both...

True or false: If two consumers both view X and Y as perfect substitutes and both consumers like an additional unit of X better than an additional unit of Y, then it is impossible for them to make a Pareto-improving trade away from their initial endowment. Explain.

You know that the definition of the variance is Var[X] = 1 n − 1 Z...

You know that the definition of the variance is Var[X] = 1 n − 1 Z ∞ −∞ (Xi − µ) 2 dFX(x), so if we have a plug-in estimator S 2 = 1 n − 1 Xn i=1 (xi − X¯) 2 and we are interested in SES2 = p Var[S2] we can use the bootstrap to obtain it. Write a function in R called bootVarSE that computes a bootstrap estimate of the standard error of the sample variance...

Let z= sqrt(4x+2y) The rate of change in z at (2,1) as we change x but...

Let z= sqrt(4x+2y) The rate of change in z at (2,1) as we change x but hold y fixed is......... The rate of change in z at (2,1) as we change y but hold x fixed is.........

Given function f(x,y,z)=x^(2)+2y^(2)+z^(2), subject to two constraints x+y+z=6 and x-2y+z=0. find the extreme value of f(x,y,z)...

Given function f(x,y,z)=x^(2)+2*y^(2)+z^(2), subject to two constraints x+y+z=6 and x-2*y+z=0. find the extreme value of f(x,y,z) and determine whether it is maximum of minimum.

Subjects