Chapter 4 Homework for Group C

Consider the market for minivans. For each of the events listed below, identify which of the determinants of demand or supply are affected. Also, indicate whether demand or supply increases or decreases and the resulting effect on price and quantity demanded.

1. People decide to have more children.
2. A strike by steelworkers raises steel prices.
3. The price of sport utility vehicles rise.
4. A stock market crash lowers people's income.

1. If people decide to have more children many determinants of demand and supply are affected. First, the demand curve would be affected by consumer income and the number of children. The more people decide to have children, the more minivans are demanded. In addition, the income of the consumer might be reduced due to the amount of children that need to be accomodated. As for supply, determinants that are affected include price of the minivans and the number of people that need to buy the minivan in order to fit their family. To sum up, demand and supply would increase due to the growing population, thus having the prices and the quantity of minivans to increase as well.

2. If there was to be a strike by steelworkers in which they raise the prices of steel, the market for minivans would be affected greatly. First, the supply of the minivans would decrease because cars would be more expensive to make, increasing the prices of the minivans. This would cause an increase in demand because more people are going to want the minivans, but there will only be a limited supply of them. The quantity demanded would decrease as well because not as many people will be willing to buy the minivan if the prices are going to raised. The determinants that affect supply would be the price of the steel, and the determinant for demand would be the number of buyers, since that would decline.

3.If the price of sport vehicles rise, the demand of minivans will rise. I say this because SUV's are bigger cars that are not technically vans or minivans. This means that if people want a SUV instead of  regular 4 door cars, but the price has risen, more people might buy minivans or vans because they are big as well, but less expensive. Although, I think the supply of minivans will remain the same because there are many different types and models of minivans, and even though the price might rise for a sports vehicles, it depends on peoples tastes of cars. The price for the market of minivans would probably remain the same, since sports vehicles are rising anyways. The quantity demanded would increase because of the better price minivans have over SUV's. Determinants would include price, the willingness of people to pay, and the different tastes people have over their cars.

4. If there was to be a stock market crash that lowered the income of people, demand would decrease, but supply of the market of minivans would increase. The demand would decrease because less people would be able or willing to afford the minivan, which causes the supply of the market to increase. The main determinant for demand is the price of the minivan as well as the income of the person trying to buy the minivan. The supply determinants would be the prices needed to make the minivan in addition to the number of different sellers that are not prosperous. This results in a great affect on price and the quantity demanded for the minivans. The price fo minivans would have to decrease due to the fact that no one is willing to buy because of the stock market crash. The quantity demanded would have to decrease as well because not as many buyers are going to be willing or possibly able to purchase the car.