Which curve shifts, and in what direction, when the following events occur in th

Question

Which curve shifts, and in what direction, when the following events occur in the domestic car market? a) The U.S. economy falls into a recession. b) U.S. auto workers go on strike. c) Imported cars become more expensive. d) The price of gasoline increases. Which curve shifts, and in what direction, when the following events occur in the domestic car market? a) The U.S. economy falls into a recession. b) U.S. auto workers go on strike. c) Imported cars become more expensive. d) The price of gasoline increases. Which curve shifts, and in what direction, when the following events occur in the domestic car market? a) The U.S. economy falls into a recession. b) U.S. auto workers go on strike. c) Imported cars become more expensive. d) The price of gasoline increases.

Explanation / Answer

(a) This would result in a decrease in demand (leftward shift of the demand curve) due to a decline in buyer income.

(b) This would result in a decrease in supply (leftward shift of the supply curve) due to reduced ability to produce output.

(c) This would result in an increase in demand (rightward shift of the demand curve) as consumers substitute relatively less expensive domestic cars for the now relatively higher priced imported cars.

(d) This would result in a decrease in demand (leftward shift of the demand curve) due to a higher price of a complementary good, gasoline.

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