Question

What effect will each of the following have on the demand for small automobiles such as the Mini-Cooper and Fiat

What effect will each of the of following have on the supply pf auto tires

How would the following change in price affect total revenue? That is would total revenue increase, decrease or remain unchange

Answer 1

Question:- What effect will each of the following have on the demand for small automobiles such as the Mini-Cooper and Fiat

Answer:-

a.Small automobiles become more fashionable.:- Demand will increase

b.   The price of large automobiles rises (with the price of small autos remaining the same).:- Demand will increase

c.   Income declines and small autos are an inferior good.:- Demand will increase

d.   Consumers anticipate the price of small autos will greatly come down in the near future. :- Demand will decrease

e.   The price of gasoline substantially drops.:- Demand Cannot be determined.

Question:- What effect will each of the of following have on the supply of auto tires

Answer:-

a. A technological advance in the methods of producing tires: Supply will increase

b. A decline in the number of firms in the tire industry:- Supply will decrease

c. An increase in the prices of rubber used in the production of tires: Supply will decrease

d. The expectation that the equilibrium price of auto tires will be lower in the future than currently: Supply will increase

e. A decline in the price of large tires used for semi trucks and earth-hauling rigs, a substitute in production. (with no change in the price of auto tires): Supply will increase

f. The levying of a per-unit tax on each auto tire sold: Supply will decrease

g. The granting of a 50-cent-per-unit subsidy for each auto tire produced: Supply will increase

Question:- How would the following changes in price affect total revenue? That is, would total revenue increase, decline, or remain unchanged?

Answer:-

a.   Price falls and demand is inelastic.:- Total revenue will decrease

b.   Price rises and demand is elastic.:- Total revenue will decrease

c.   Price rises and supply is elastic. .:- Total revenue will increase

d.   Price rises and supply is inelastic. .:- Total revenue will increase

e.   Price rises and demand is inelastic. .:- Total revenue will increase       

f.    Price falls and demand is elastic. .:- Total revenue will increase

g.   Price falls and demand is of unit elasticity. .:- Total revenue will remain the same

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