Refer to the above graph, which shows the market for bicycles. S1 and D1 are the original supply and demand curves. D2 and D3 and S2 and S3 are possible new demand and supply curves. Starting
From the initial equilibrium (point 1), which point on the graph is most likely to be the new equilibrium
After the introduction of technological improvements in bicycle production and successful publicity
Campaigns by the government on the virtues of bicycling to work?

Question

Quizplus · Accepted Answer

The technological improvements in bicycle production and successful publicity campaigns by the government on the virtues of bicycling to work would increase the demand for bicycles. This would shift the demand curve to the right from D1 to D2 or even further to D3. At the same time, technological improvements would reduce the cost of producing bicycles, leading to an increase in the supply of bicycles. This would shift the supply curve to the right from S1 to S2 or even further to S3. The new equilibrium would be where the new supply and demand curves intersect, which is at point 5. At this new equilibrium, the price of bicycles would be lower than at the initial equilibrium, but the quantity sold would be higher.

Refer to the Above Graph, Which Shows the Market for Bicycles