Question

Consider the following statements, based on a positive economic analysis that assumes that all other things remain constant. For each, list one other thing that might change and thus offset the outcome stated.

(a) Increased demand for laptop computers will drive up their price.

(b) Falling gasoline prices will result in additional vacation travel.

(c) A reduction of income tax rates will result in more people working.

Short answer

(a) Increase in supply will lead to the downfall of the price.

(b) Increase in price of cars.

(c) Decrease in the value of money due to inflation.

Step-by-step solution

Step 1. Positive or Normative Analysis.

Positive analysis refers to descriptive facts and statements whereas Normative analysis is based on the judgments of economic policies.

Step 2. The other factor.

(a) The other determinant that can offset the stated outcome is the increase in supply which will lead to the downfall in prices.

(b) The other determinant that can offset the stated outcome is the increase in the prices of cars.

(c) The other determinant that can offset the stated outcome is the decrease in the value of money due to inflation.