3. Determinants of demand The following graph shows the demand curve for sedans

Question

3. Determinants of demand The following graph shows the demand curve for sedans (for example, Toyota Camrys or Honda Accords) in New York City. For simplicity, assume that all sedans are identical and sell for the same price. Initially, the graph shows market demand under the following circumstances: Average household income is $50,000 per year, the price of a gallon of regular unleaded gas is $4 per gallon, and the price of a subway ride is $2.00 Use the graph input tool to help you answer the following questions. You will not be graded on any changes you make to this graph Note: Once you enter a value in a white field, the graph and any corresponding amounts in each grey field will change accordingly Graph Input Tool Demand for Sedans Demand for Sedans 40 Price of a sedan (Thousand of dollars) 20 Quantit Demanded Sedans per month) 450 6 20 Demand Shifters Average Income (Thousands of dollars) 50 emand 10 Price of Gas Dollars per gallon) 4 Price of a Subway Ride 0 100 200 300 400 500 600 700 800 900 (Dollars) QUANTITY (Sedans per month)

Explanation / Answer

a) This would cause a MOVEMENT ALONG the demand curve.

b) An increase in avergae income cause a rightward SHIFT the demand curve. thNerefore, you may conclude that sedans are NORMAL good.

c) because drive a car and taking the subway are SUBSTITUTE, an increase in the price of subway ride shifts the demand for sedands to the RIGHTWARD.

Related Questions

Navigate

• Browse (All)
• Browse 3
• Subjects

---

---

Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.