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ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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Consider the graph. Suppose that the price of a sedan increased from $15,000 to $20,000. This would cause amovement along_______________(CHOOSE BETWEEN THESE: Movement along or shift of) the demand curve.

A decrease in average income causes a leftward___________ (CHOOSE BETWEEN THESE: Movement along or shift of) the demand curve; therefore, you may conclude that sedans are___________(CHOOSE BETWEEN THESE: a normal or an inferior) 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 falls from $3.00 to $2.50. Because driving a car and taking the subway are____________(CHOOSE BETWEEN: substitute goods or complementary goods) , a decrease in the price of a subway ride shifts the demand curve for sedans to the______________(CHOOSE BETWEEN THESE: right or left) .

Consider the graph. Suppose that the price of a sedan increased from $15,000 to $20,000. This would cause a movement along
curve.
A decrease in average income causes a leftward
the demand
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 falls from $3.00 to $2.50. Because driving a car and taking the subway are
decrease in the price of a subway ride shifts the demand curve for sedans to the

The following graph shows the demand curve for sedans 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 gallon of
regular unleaded gas is $4 per gallon, and the price of a subway ride is $3.00.
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.
PRICE (Thousands of dollars per sedan)
40
20
10
0
0
Demand for Sedans
Demand
100 200 300 400 500 600 700 800 900
QUANTITY (Sedans per month)
Graph Input Tool
Demand for Sedans
Price of a sedan
(Thousand of
dollars)
Quantity
Demanded
(Sedans per month)
Demand Shifters
Average Income
(Thousands of
dollars)
Price of Gas
(Dollars per gallon)
Price of a Subway
Ride
(Dollars)
20
450
50
4
3
?

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