Using carefully labelled demand and supply diagrams, show the impacts on equilibrium price and quantity in the following situations:
a) New cars are normal goods. What will happen to the equilibrium price and quantity of new cars if the price of gasoline falls, the price of steel increases, public transportation becomes more expensive and less comfortable, auto workers receive higher wages, and automobile insurance becomes less expensive? b) Scientists reveal that consumption of oranges decreases the risk of diabetes and, at the same time, farmers use a new fertilizer that makes orange trees more productive. Illustrate and explain what effect these changes have on the equilibrium price and quantity of oranges.
c) The impacts in a particular market for good ‘x’ which is an inferior good if buyers suffer a fall in their incomes and, at the same time, the price of inputs for good ‘x’ falls.