Question

1. What would be the effect of each of the following on the demand for Chevrolets in the United States? In each case, identify the responsible determinant of demand and briefly describe the effect on demand.

a. The price of Fords plummets.

b. Consumers believe that the price of Chevrolets will rise next year.

c. The incomes of Americans rise.

d. The price of gasoline falls dramatically.

e. A change in the price of Chevrolets

Answer 1

a) As the price of the Ford decrease the demand for the Ford cars will increase and that will cause a movement along the demand curve, people will buy more cars and price will be the determinant.

b) As the price of the Chevrolet is rising next year, people will hold there demand for Ford in the present year and that will shift the demand curve to the left and the new equilibrium will be at a lower price and lower quantity.

c) An income of Americans rise will shift the demand curve to the right and they will demand more of the cars, this will incease the price and quantity sold in the market.

d) as gasoline and cars are complemetary a fall in the price of gasoline will shift the demand curve of ford to the right and it will increase the demand in the market.

e) A change in the price of the Chevrolet will decrease the demand for ford and shft the demand curve to the left.