Consider the graph. Suppose that the price of a sedan decreased from $20,000 to $15,000. This would cause a the demand curve. A decrease in average income causes a leftward v the demand curve; therefore, you may conclude that sedans are good. (Hint: Try substituting different values for Average Income in the graph input tool and observing what happens.) Suppose that the price of a subway ride rises from $2.00 to $2.50. Because driving a car and taking the subway are , an increase in the price of a subway ride shifts the demand curve for sedans to the
Consider the graph. Suppose that the price of a sedan decreased from $20,000 to $15,000. This would cause a the demand curve. A decrease in average income causes a leftward v the demand curve; therefore, you may conclude that sedans are good. (Hint: Try substituting different values for Average Income in the graph input tool and observing what happens.) Suppose that the price of a subway ride rises from $2.00 to $2.50. Because driving a car and taking the subway are , an increase in the price of a subway ride shifts the demand curve for sedans to the
Chapter1: Making Economics Decisions
Section: Chapter Questions
Problem 1QTC
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Question
Transcribed Image Text:3. Determinants of demand
The following graph shows the demand curve for sedans (for example, Toyota Camrys or Honda Accords) in New York City. For simplicity, assume that
all sedans are identical and sell for the same price. Initially, the graph shows market demand under the following circumstances: Average household
income is $50,000 per year, the price of a subway ride is $2.00 per ride.
Use the graph input tool to help you answer the following questions. You will not be graded on any changes you make to this graph.
Note: Once you enter a value in a white field, the graph and any corresponding amounts in each grey field will change accordingly.
Graph Input Tool
Demand for Sedans
Demand for Sedans
40
I Price of a sedan
(Thousand of
dollars)
20
Quantity
Demanded
450
30
(Sedans per month)
Demand Shifters
Average Income
(Thousands of
dollars)
50
Demand
10
Price of Subway
(Dollars per ride)
2
100 200 300 400 500 600 700 800 900
QUANTITY (Sedans per month)
PRICE (Thousands of dollars per sedan)
Transcribed Image Text:Consider the graph. Suppose that the price of a sedan decreased from $20,000 to $15,000. This would cause a
the demand
curve.
A decrease in average income causes a leftward
v the demand curve; therefore, you may conclude that sedans are
good. (Hint: Try substituting different values for Average Income in the graph input tool and observing what happens.)
Suppose that the price of a subway ride rises from $2.00 to $2.50. Because driving a car and taking the subway are
an increase
in the price of a subway ride shifts the demand curve for sedans to the
Expert Solution
Step 1
In economics, the law of demand is an important concept that establishes the functional relation between the price of a good and its quantity demanded. According to this law, holding all the other factors constant, if the price of a good increases, then the quantity demanded for it will fall, and vice versa.
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