Question

Indicate which curve shifted-and in which direction-for each of the following. Assume that only one curve shifts. a. The price of furniture rises as the quantity bought and sold falls. b. Apartment vacancy rates increase while average monthly rent on apartments declines. c. The price of personal computers continues to decline as sales skyrocket.

Short answer

a. The supply curve shifts to the left. b. The supply curve shifts to the right. c. The demand curve shifts to the right.

Step-by-step solution

Understanding Scenario A

In scenario A, the price of furniture rises while the quantity bought and sold falls. This is an indicator of a decrease in supply. When supply decreases, producers are unable to produce as many goods as before which in turn leads to higher prices. Therefore, the supply curve has shifted to the left.

Understanding Scenario B

In scenario B, apartment vacancy rates increase while the average monthly rent on apartments declines. This indicates an increase in supply. When supply increases, there are more goods available than the market demands which causes prices to decrease. Therefore, the supply curve has shifted to the right.

Understanding Scenario C

In scenario C, the price of personal computers continues to decline as sales skyrocket. This is an indicator of an increase in demand. When demand increases, more consumers are willing to pay for a good thus leading to increased sales and decreased prices. Therefore, the demand curve has shifted to the right.