Question 9 (1 point) There is increasing concern by consumers about physical fit

Question

Question 9 (1 point) There is increasing concern by consumers about physical fitness. Also, the price of gasoline falls. What is the effect on 1. demand, 2. supply, 3. price and 4. quantity respectively, for the bicycle market? (I suggest you draw a small graph in order to answer this question) 1. decreases, 2. increases, 3 decreases, 4. decreases 1. uncertain, 2. increases, 3. uncertain, 4. uncertain 1. increases, 2. does not change, 3. decreases, 4. decreases 1. increases, 2. does not change, 3. increases, 4. increases 1. uncertain, 2. does not change, 3. uncertain, 4. uncertain ed Save

Explanation / Answer

Bicycle obviously helps physical fitness. A raise in awareness about physical fitness would increase the demand of bicycles. Also, personal vehicles, which are substitutes of bicycle, conusme gasoline. Hence, decrease in the gasoline price would increase the demand for those personal vehicles, which would decrease the demand of bicycles. That means as taking ride in a personal vehicles is cheaper, and hence, bicycles are less preferred. Hence, the net effect of demand of bucycles is uncertain, as it is not given which effect dominates the other, and hence, the net effect may be that the demand is uncertain. If the increase in demand is more than the decrease in demand, then demand would increase, and if the increase in demand is less than the decrease in demand, then demand would decrease, and if the increase in demand is equal to the decrease in demand, then demand wouldn't change. But as the magnitudes of the change is not given, the change is uncertain. The supply of bicycles however, would not be affected, as the supply depends on the input materials like labor, raw materials, etc, which doesn't change.

The correct option is

As the demand change is uncertain, and the supply doesn't change, the price and quantity change is also uncertain, as in this case, they would depend on in what way the demand change.

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