1- Which one of the following will not cause a shift in the supply curve for sho

Question

1- Which one of the following will not cause a shift in the supply curve for shoes?

New trade rules allow increased imports of shoes

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2-

Suppose that the price of milk goes up. What would we expect to happen in the market for cereal, assuming that milk and cereal are commonly consumed together?

Price will increase but quantity will remain constant.

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3- Suppose that the federal taxes on gasoline used for automobiles go up. What would we expect to happen in the market for airline travel?

Explanation / Answer

1. More consumers prefer to go barefoot

When consumers prefer to go barefoot then it decreases demand of shoes in the market and does not affect the supply curve.

2. When price of milk increases then demand of cereals decreases in the market because these are complementary goods. Decrease in demand shifts demand curve leftwards causing decrease in equilibrium price and quantity.

Price will decrease and quantity will decrease.

3. Tax on gasoline decreases the supply of airline travel and thus shifts supply curve shifts leftwards. This results into increase in equilibrium price and decrease in equilibrium quantity.

Price will increase and quantity will decrease.

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