Consider the market for minivans. For each of the events...

Consider the market for minivans. For each of the events listed here, identify which of the determinants of demand or supply are affected. Also indicate whether demand or supply increases or decreases. Then draw a diagram to show the effect on the price and quantity of minivans. a. People decide to have more children. b. A strike by steelworkers raises steel prices. c. Engineers develop new automated machinery for the production of minivans. d. The price of sports utility vehicles rises. e. A stock market crash lowers people's wealth.

Consider the market for minivans. For each of the events listed here, identify which of the determinants of demand or supply are affected. Also indicate whether demand or supply increases or decreases. Then draw a diagram to show the effect on the price and quantity of minivans.
a. People decide to have more children.
b. A strike by steelworkers raises steel prices.
c. Engineers develop new automated machinery for the production of minivans.
d. The price of sports utility vehicles rises.
e. A stock market crash lowers people's wealth.

Key Concepts

Determinants of Demand

These refer to the non-price factors that affect how much of a good consumers are willing and able to purchase. They include elements such as consumer tastes and preferences, income and wealth, expectations about the future, and the prices of related goods. Changes in any of these determinants cause the entire demand curve to shift, which alters the market equilibrium price and quantity.

Determinants of Supply

These are the factors other than the price of the good that influence the quantity that producers are willing to offer for sale. Key determinants include production costs (such as input prices), technological advances, number of sellers, and expectations about future market conditions. Modifications in any of these factors lead to shifts in the supply curve, thus affecting the market equilibrium.

Market Equilibrium

Market equilibrium is the point where the quantity demanded by consumers equals the quantity supplied by producers. This balance determines the prevailing market price and quantity. When either the demand or supply shifts due to changes in their determinants, a new equilibrium is established, which can result in changes to both the price and the quantity of the good sold.

Shifts in Curves

Shifts in the demand or supply curves occur when there is a change in the underlying determinants other than the good's own price. An outward shift of the demand curve indicates an increase in demand, while an inward shift indicates a decrease. Similarly, an outward shift of the supply curve represents an increase in supply, and an inward shift indicates a decrease. The diagrammatic representation of these shifts helps illustrate the changes in market equilibrium resulting from exogenous shocks.

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