Given the Products Below and the Events That Affect Them

Question

Examlex · Accepted Answer

The Answer is (a) The demand for calculators increases because of an increase in the number of buyers.The supply of calculators increases because of a fall in resource prices (productivity reduces resource costs).The equilibrium quantity increases, but what happens to the equilibrium price is indeterminate and depends on the magnitudes of the shifts.
(b) The supply of gasoline decreases because of a rise in resource price (oil prices increase due to a cutback in production).The demand for gasoline increases due to an increase in the taste for taking driving vacations.The equilibrium price increases, but what happens to the equilibrium quantity is indeterminate and depends on the magnitudes of the shifts.
(c) The demand for new homes decreases because of a decline in consumer incomes.The supply of new homes increases because of a fall in the price of labour resources (productivity increases reduce resource costs).The equilibrium price decreases, but what happens to the equilibrium quantity is indeterminate and depends on the magnitudes of the shifts.
(d) The supply of tobacco decreases because of a cut in government subsidies for tobacco.The demand for tobacco decreases due to a decline in the taste for smoking tobacco.The equilibrium quantity decreases, but what happens to the equilibrium price is indeterminate and depends on the magnitudes of the shifts.

Given the Products Below and the Events That Affect Them

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