Question

reasons for changes in supply
part i: read the following seven newspaper head - ings. in each case, decide if the event will cause any change in the current market supply of new cars sold in the united states. if so, decide if it is an increase or decrease, and write the correct answer. for example, if you think headline a means there will be a decrease in supply, write \decrease\ in the first blank. for headline b, if you think supply will increase, write \increase\. if the event causes no change in supply, write
o change\.
part ii: for each headline, list the reason (determinant of demand) for the change. your options for reasons are the determinants of demand as below:
a change in the cost of factors of production
a change in technology
a change in producers price expectations.
a change in the number of sellers in the market
a change in profit opportunities from producing other products
a. large auto producer goes bankrupt, closes factories
a. supply ____________ reason ____________
b. shortages abound in consumer electronics - consumers cant buy enough new gadgets
a. supply ____________ reason ____________
c. steel prices rise 10%
a. supply ____________ reason ____________
d. buyers reject new car models: sellers lower prices
a. supply ____________ reason ____________

Explanation:

• A. A large auto - producer going bankrupt and closing factories reduces the number of sellers in the market, thus decreasing supply.
• B. Shortages in consumer electronics are about demand - side issues and do not directly affect the supply of new cars, so there is no change in the supply of new cars.
• C. A rise in steel prices (a factor of production for cars) increases the cost of production, leading to a decrease in supply.
• D. Buyers rejecting new car models and sellers lowering prices is a demand - related issue and does not directly impact the supply of new cars, so there is no change in supply.

Answer:

A. a. Supply: decrease Reason: A change in the number of sellers in the market
B. a. Supply: no change Reason: None of the given determinants (as it's a demand - side issue for other products)
C. a. Supply: decrease Reason: A change in the cost of factors of production
D. a. Supply: no change Reason: None of the given determinants (as it's a demand - side issue)