Homework Week 2

Chapter 3 #3,6,9 and 11

3. What effect will each of the following have on the demand for small automobiles such as the Mini Cooper and Smart car?

a. Small automobiles become more fashionable----The consumer may purchase more of the small car due to the options that appeal to them. That would make the demand for this cars increase.

b. The price of large automobiles rises (with the price of small autos remaining the same). ------ Due to raising cost in the larger vehicles I believe sales for smaller cars will increase which would make the demand higher.

c. Income declines and small autos are an inferior good.-------The consumer will buy more or prefer for the cheaper automobile due to the decline of income. The demand may become higher in this case.

d. Consumer anticipate that the price of small autos will greatly come down in the near future.------The consumer will buy more and the demand will increase due to the price of the automobile.

e. The price of gasoline substantially drops-----The demand will increase due to the prices being so low.

6. What effect will each of the following have on the supply of auto tires?

a. A technological advance in the methods of producing tires..-----Supply will increase

b. A decline in the number of firms in the tire industry.-----No as many tires will be produce so the demand would decrease.

c. An increase in the price of rubber used in the production of tires.------prices will increase on tires and then the consumer will by less so the supply will decrease.

d. The expectation that the equilibrium price of auto tires will be lower in the future than currently.-----Tire supply would increase.

e. A decline in the price of the large tires used for semi trucks and earth-hauling rigs (with no change in the price of auto tires)-----The supply of tires might decrease but I believe this would be an example of market equilibrium.

f. The levying of a per-unit on each auto tire...