Question

For each of the following events, assume that either the supply curve or the demand curve (not both shifted). Explain which curve shifted and indicate the direction of the shift. a. From 1950 to 1979 the wages paid to fruit pickers increased while the number of fruit pickers employed decreased. b. During the same period the price of radio sets declined, while the number of radio sets purchased increased. c. Housing prices are rising but more houses are sold. d. Australian Airlines reduces its average plane fare by 30 percent in order to attract more customers.

Answer 1

a. From 1950 to 1979 the wages paid to fruit pickers increased while the number of fruit pickers employed decreased.

Answer: In this scenario the number of the fruit pickers has reduced while the fruit picker’s wages has increased. Hence, the demand has not changed. The supply of the fruit pickers has reduced thus the fruit pickers supply has shifted to the left

b. During the same period the price of radio sets declined, while the number of radio sets purchased increased.

Answer: In this scenario the price of the radio sets has fallen however the number of radio sets purchased increased. Thus the demand for radio sets increased and consequently demand curve has shifted to the right

c. Housing prices are rising but more houses are sold.

Answer: In this scenario the housing prices have increased however more houses were sold. Thus the demand of the houses has increased and consequently demand curve will move to the right

d. Australian Airlines reduces its average plane fare by 30 percent in order to attract more customers.

Answer: In this scenario the Australian Airlines decreased its average plane fare by 30 percent for attracting more customers. Thus the motive is to increase the revenue in the future. To accommodate the increasing customers, the supply is been increased and thus the supply curve is moved to the right