Chapter 3, Problem 12P

To determine

To Explanation:

The following questions based on the given situation.

After several years of decline, the market for hand-made acoustic guitars is making a comeback. These guitars are usually made in small workshops employing relatively few highly skilled luthiers. Access the impact on the equilibrium price and quantity of hand-made acoustic guitars as a result of each of the following events. In your answers indicate with curve (s) shift (s) and in which direction.

1. Environmentalists succeed in having the use of Brazilian rosewood banned in the United States, forcing luthiers to seek out alternative, more costly woods.
2. A foreign producer reengineers the guitar-making process and flood the market with identical guitars.
3. Music featuring handmade acoustic makes a comeback as audiences’ tire of heavy metal and alternative rock music.
4. The economy goes into a deep recession and the income of the average American falls sharply.

Concept Introduction:

Recession: The recession is an economic situation where there is decreased economic activity, in this situation more employees lose their jobs.

Demand: The demand is defined as the ability to pay for goods and services.

Supply: The supply is the ability of the seller to produce the goods and services and sell it at the prevailing price