The Tollowing calculator shows the supply curve for sedans in an imaginary marke

Question

The Tollowing calculator shows the supply curve for sedans in an imaginary market. Assume that all sedans are identical and sell for the same price. Two factors that affect the supply of sedans are the technology-the speed with which auto-manufacturing robots can fasten bolts, or "robot speed"-and the wage rate that auto manufacturers pay their employees. Initially, the graph shows the supply curve when robots can fasten 1,500 boits per hour and autoworkers earn $30 per hour 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 the grey field will ch ange accordingy Graph Input Tool 50 T 45 40 35+ Price of a sedan Thousands of antity supplied s per 495 Supply 8 30 25 Supply Shifters 20 r1500 Robot Speed Bolts per hour) Autoworker w (Dollars per hour) w 15 10 0 100 200 300 400 500 600 700 800 900 QUANTITY (Sedans per month)

Explanation / Answer

Suppose that the price of sedans decreases from $26,000 to $21,000 per car. This would cause the quantity supplied of sedans to decrease, which is reflected on the graph by a movement along the supply curve. Because supply curve shows the relationship between price and quantity supplied while other factors held constant. Therefore, when price decreases , quantity supplied decreases becaue of upward sloping supply curve.

Suppose the worker's union accept a pay cut from $30 per hour to $25 per hour. assuming that the robot speed remains the same,this would cause a rightward shift of the supply curve. This is because the pay cut makes cars less expensive to build.

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