True, false or uncertain? Justify your response to the following statements. a)

Question

True, false or uncertain? Justify your response to the following statements.

a) In equilibrium, an increase in the average income for a city decreases the market area for an average hair salon.

b) After many requests from wine growers over many years, the INAO in France changed the rules to allow more land to be used to legally grow grapes for use in the production of champagne. Those lands had been used to grow grapes for wine but that wine could not be bottled as champagne. While this change will benefit the owners of the land recently permitted to grow champagne grapes, it will also increase the total amount of land used to grow grapes and the total production of grapes in the area.

c) Electric cars dealers need electrical supply outlet stations and the stations need drivers of those cars to make a profit, just like car dealers who sell gas powered cars need gas stations and vice versa. Assuming that the government passes no special rules related to these cars and stations, this situation is an example of a self-reinforcing effect.

Explanation / Answer

a)uncertain-as some existing customers may start visiting more affluent salons , however increase in average income also leads to new customers coming in to average salons so net effect is unknown

b)false-it will lead to fall in price of land being used for champagne- grape production  as more land is now permitted for growing grapes for champagne

c)false-this is not an example of self reinforcement

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