Figure 3-8

-Refer to Figure 3-8. The graph in this figure illustrates an initial competitive equilibrium in the market for motorcycles at the intersection of D₁ and S₁ (point A) If there is an increase in the wages of motorcycle workers and an increase in the price of motorcycle insurance, a complement to motorcycles, the equilibrium could move to which point?
A) A
B) B
C) C
D) E

Question

Figure 3-8
 
-Refer to Figure 3-8. The graph in this figure illustrates an initial competitive equilibrium in the market for motorcycles at the intersection of D₁ and S₁ (point A) If there is an increase in the wages of motorcycle workers and an increase in the price of motorcycle insurance, a complement to motorcycles, the equilibrium could move to which point?
A) A 
B) B 
C) C 
D) E

Quizplus · Accepted Answer

An increase in wages raises production costs, shifting the supply curve left (S₁ to S₂). An increase in the price of a complement (motorcycle insurance) reduces demand, shifting the demand curve left (D₁ to D₂). The new equilibrium is at point E, where the new supply and demand curves intersect.

Figure 3-8 -Refer to Figure 3-8. the Graph in This Figure Illustrates