Week 2 Chapter Review Question
Rachel Serfati
Explain what happens to supply, price, and quantity when the following conditions occur:
1. A new technology is developed to pick peaches
Supply increases because it would make the picking process faster, Price would drop as the
company wouldn’t have to pay for labor, Quantity would increase because of sales going
up.
2. The government allows more furniture imports from China.
Supply would increase because more imports would come to the US, Price would decrease
because the demand would lower, Quantity would increase because more furniture would be
purchased.
3. Interest rates are lowered to help spur the economy.
Supply would have no choice but to increase at the chance of demand increasing, Price
would decrease because the rise in Quantity with low interest rates.
4. The cost of rubber which is used in the manufacturing of tires increases.
Supply would decrease because of the increased price in rubber, Price would increase
because the cost to produce the rubber increases, Quantity decreases because the price
increase.