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17 January, 09:13

Consider the market for cars. Which determinant of demand is affected by each of the following events? Choose from: consumer preferences, prices of related goods, incomes, expectations, and the number of buyers.

a. Environmentalists launch a successful One Family, One Car campaign.

b. A baby boom occurred 16 years ago.

c. Layoffs increase as the economy sheds millions of jobs.

d. An oil shortage causes the price of gasoline to soar.

e. The government offers tax rebates in return for the purchase of commuter rail tickets.

f. The government announces a massive plan to bail out the auto industry and subsidize production costs.

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  1. 17 January, 12:18
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    a. consumer preferences

    b. number of buyers

    c. incomes

    d. price of related goods

    e. price of related goods

    f. expectations

    Explanation:

    a. Here, the consumer preferences regarding cars will change which will cause a decline in the demand for cars.

    b. A baby boom implies an increase in population so the number of buyers will increase which will increase the demand.

    c. Layoffs mean that unemployment will increase. This will reduce the income of the consumer. As a result, the demand for cars will decline.

    d. Gasoline and cars are complements. An increase in the price of gasoline will cause the demand for cars to decline. So here demand is affected by price of related goods.

    e. Tax rebates on the purchase of rail commuters will increase the demand for rail transport. Here, the demand is being affected by the price of a related good.

    f. As the government announces to subsidize the production costs of the auto industry, the consumers will expect the price of cars to change in the future. The demand here will be affected by consumer expectations.
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