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4 June, 04:18

For each of the following events, identify which of the determinants of demand or supply are affected. If demand is unaffected by this event because it creates only a supply change, select the "None" option under the "Demand Determinant" column. Similarly, if supply is unaffected by this event because it creates only a demand change, select the "None" option under the "Supply Determinant" column. Event Demand Determinant Supply Determinant People decide to have more children. A strike by steelworkers raises steel prices. Engineers develop new automated machinery for the production of minivans. The price of sports utility vehicles rises. A stock-market crash lowers people's wealth.

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  1. 4 June, 07:21
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    (1) Demand Determinant - No. of buyers

    Supply Determinant - None

    When people decided to have more children then this will result in more number of buyers. This will affect the demand for a particular good and shifts the demand curve towards right.

    (2) Supply Determinant - Input prices

    Demand Determinant - None

    Steel is an input for the firms and if there is an increase in the price of steel then as a result cost of production increases which results in lower supply for their product.

    (3) Supply Determinant - Technology

    Demand Determinant - None

    New technology will increase the productivity of the firms and hence, increase the supply of the products.

    (4) Demand Determinant - Price of substitute or complimentary goods

    Supply Determinant - None

    If the price of substitute good rises then as a result demand for minivans increases. This will shift the demand curve rightwards.

    (5) Demand Determinant - Income

    Supply Determinant - None

    Decrease in the wealth of the consumers will result in lower demand for the minivans. Therefore, demand curve shifts leftwards.
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