Respuesta :
Answer: The explanation are as follows:
Explanation:
(A) If small automobiles become more fashionable then this will attract the consumers attention towards small automobiles. So, this will increase the demand for the small automobiles.
(B) If the price of large automobiles rises and the price of small automobiles remains the same. They both are substitute goods. So, the demand for small automobiles increases as the price of its substitute goods increases.
(C) If small automobiles are inferior good and there is reduction in the income of consumers. This will increase the demand for small automobiles as the income of the consumers decreases.
(D) If consumers anticipate that the price of small autos will greatly come down in the near future then they stop buying small automobiles today. So, the demand for small automobiles decreases because consumers waiting for the lower price in the near future.
(E) Gasoline and small automobiles are complementary goods, therefore, if the price of gasoline substantially drops, as a result demand for small automobiles increases.
The effects of change in demand for small automobiles such as Mini-Cooper and Fiat 500 in each of the following cases will be as -
- When there is a change in the tastes and preferences of the consumer to consume fashionable goods, the demand for small automobiles in fashion will ultimately increase for the period.
- Small and large automobiles are substitute goods. If the prices of substitute increase, which is large automobiles in this case, there will be an increase in the demand for the small automobiles.
- Lowered consumer income will shift consumer's mentality to consume more inferior goods. Here, the demand for small autos being an inferior good will increase.
- If there is a mental bias in the minds of a rational consumer that the prices for small autos will be decreased in the near future then, in such case, a rational consumer will wait for prices to decrease and the demand for the current period will be lowered.
- Automobiles run on gasoline fuels. So, they are complimentary goods. If the costs of driving small autos is decreased, this will lead to an increase in demand for small autos.
How does a change in demand for a commodity take place?
A change in demand for a product is dependent on a change in various external factors like consumer's income, preferences, prices of substitutes and complimentary goods and many such factors.
In the above example, we have seen either an increase or decrease in the demand for the small autos in different conditions when it is assumed that there is no change in the prices of small autos in the current market.
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