5 pts D Question 13 In the shoe market, if the cost of leather for shoes falls a

Question

5 pts D Question 13 In the shoe market, if the cost of leather for shoes falls and household incomes falls (double shift) module 4 O price of shoes is uncertain, wuantity of shoes falls O price of shoes falls, quantity change is uncertain O price of shoes rises, quantity of shoes rises O both price and quantity of shoes fall D Question 14 5 pts if the price rises and quantity falls for shoes, the simplest reason is module 4 O demand for shoes shifted right O supply of shoes shifted left O supply of shoes shifted right O demand for shoes shifted left

Explanation / Answer

13. Option 2: Price of shoes falls, quantity change uncertain.

Explanation: Fall in income will result in a leftward shift of demand curve and fall in leather price will result in a rightward shift in the supply curve. Because of this double shift, the equilibrium price will certainly go down as the demand and supply curve will intersect at a lower point. However, we cannot surely predict the movement in quantity without knowing how much both the curve shifts.

14. Option 2: Supply of shoes shifted left.

Explanation: When the supply curve shifts left and the demand curve remains at the same position, the new equilibrium point will be above (price goes up) and towards the left (quantity goes down)of the old equilibrium point.

15. Option 1: Perfectly inelastic demand

Explanation: Firms are price takers in a perfectly competitive market. So, they can sell products only at the market price.

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