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 an increase in wages of bicycle workers, and a signiﬁcant increase in the price of gasoline?

Question

Quizplus · Accepted Answer

An increase in wages of bicycle workers will lead to a decrease in supply which shifts the supply curve leftward to S2. At point 2, there will be a shortage of bicycles, and the price will increase. A significant increase in the price of gasoline will lead to a decrease in demand which shifts the demand curve leftward to D3. At point 4, the price of bicycles will decrease, and the quantity demanded will increase, creating a new equilibrium. Therefore, the new equilibrium point is at point 4, which is the intersection of S2 and D3.

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