Question

Use the Supply and Demand Model to explain the changes in equilibrium price and equilibrium quantity in the market for Ford F150 Pickup Trucks. Make sure to include the following information in each part of your answers: 1. Which curve shifts 2. Which direction it moves 3. What is the impact on equilibrium prices and equilibriums quantities as a result of this shift Explain each of the following events separately and then explain what happens if they occur at the same time. 1) The price of Dodge and Chevy pickup trucks increases by 15%. 2) The introduction of recent tariffs on steel increase the price of critical truck parts by 25%.

Answer 1

1) Since Dodge and Chevy are competitors to Ford, an increase in their price will lead to an increase in Ford's demand. This will lead to

a shift in demand curve

to the right indicating more quantity demanded for same price

resulting in an increase in equilibrium quantity and price

2) an increase in the price of an input will lead to a

shift in supply curve

to its left indicating less quantity offered for same price

leading to an increase in equilibrium price and a reduction in equilibrium quantity

3) if both happen together, equilibrium price will go up but quantity may go up, remain unchanged or go down depending on the relative quantum of the shifts in the two curves.