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 D2 and S1 (point C).Which of the following changes would cause the equilibrium to change to point B?
A)A positive change in the technology used to produce motorcycles and decrease in the price of motorcycle insurance,a complement to motorcycles.
B)An increase in the wages of motorcycle workers and a decrease in the price of motorcycle insurance,a complement to motorcycles.
C)An increase in the number of motorcycle producers and an increase in the number of consumers who prefer riding motorcycles.
D)An increase in the wages of motorcycle workers and an increase in the price of motorcycle insurance,a complement to motorcycles.

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 D2 and S1 (point C).Which of the following changes would cause the equilibrium to change to point B?
A)A positive change in the technology used to produce motorcycles and decrease in the price of motorcycle insurance,a complement to motorcycles. 
B)An increase in the wages of motorcycle workers and a decrease in the price of motorcycle insurance,a complement to motorcycles. 
C)An increase in the number of motorcycle producers and an increase in the number of consumers who prefer riding motorcycles. 
D)An increase in the wages of motorcycle workers and an increase in the price of motorcycle insurance,a complement to motorcycles.

Quizplus · Accepted Answer

Point B represents a new competitive equilibrium point with a higher quantity and lower price compared to point C. This can be caused by a decrease in production costs, such as an increase in worker productivity (which can be achieved through higher wages) or a decrease in input prices. Additionally, a decrease in the price of a complement to motorcycles, such as insurance, would also increase demand for motorcycles and shift the demand curve to the right (from D2 to D1), leading to a higher quantity and lower price. Options A and D include a decrease and an increase in the price of motorcycle insurance, respectively, which would have opposing effects on demand and might cancel each other out. Option C represents an increase in both supply and demand, which might lead to an increase in quantity but not necessarily a lower price (depending on the magnitude of the shifts).

Figure 3-8 -Refer to Figure 3-8.The Graph in This Figure Illustrates an Figure