SUPPLY AND DEMAND EXERCISE –LEGO BRICKS The following questi...

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SUPPLY AND DEMAND EXERCISE –LEGO BRICKS The following questions apply to the current market for Lego Brand building bricks in New York. EVENT Which curve shifts? (D or S) Which way? What happens to equilibrium price? (use arrows) What happens to equilibrium quantity? (use arrows) 1. The number of children in New York City increases drastically 2. Doctors find that children who play with Lego bricks do better in school. 3. There is an expectation by consumers of a major price increase on Lego building bricks to come next month. 4. Costs of advertising Lego building bricks in the newspapers and on television goes down. 5.. The toymakers union achieves a pay increase for their members. 6. A recession hits the United States and incomes fall drastically. 7. The price of plastic ‘windows and doors,’ a complement to Lego bricks goes down. 8. The price of ‘Megablocks’ brand building bricks goes up. 9. Rising oil prices increase the cost of plastic, the major ingredient in the production of Lego brand building bricks. 10. Rents on toy warehouse space go down. 11. Lego wins the ‘Toy of the Year’ Award 12. A competing company” LockBlocks” goes out of business. 13. Family income in New York goes up 14. The government mandates extra safety devices in Lego company factories. 15. “Megablocks” introduces a new improved assortment of bricks. 16. AFOLs (Adult Fans of Lego) start buying Lego building bricks. 17. A new ‘plastic-molding” machine is created to manufacture bricks. THE MARKET FOR MINIVANS Explain, for each of the following events, what happens in the market for minivans in the United States. (Please use D or S for the first column, in or out for the second, and arrows for the last two. EVENT WHICH CURVE WHICH WAY? WHAT HAPPENS TO EQUILIBRIUM... SHIFTS? PRICE? QUANTITY? 1. The price of gasoline decreases. 2. A new federal law raises the minimum driving age from eighteen to twenty-five. 3. The price of sports utility vehicles rises. 4. People decide to have more children. 5. The federal government places a large excise tax on the producers of automobiles, but not on minivans. 6. A stock market crash lowers people’s wealth. 7. A credit crunch makes it more difficult to finance the purchase of minivans. 8. The price of minivans is expected to increase substantially next month. 9. Federal income taxes are dramatically increased by the Obama administration. 10. A strike by steelworkers raises the price of steel, a major input in minivans. 11. A number of new firms decide to make and sell minivans. 12. Engineers develop new automated machinery for the production of minivans. 13. Many new free super-highways and bridges are built in the country as a result of the Obama stimulus package. 14. College girls decide to only date guys who drive minivans. 15. The workers who manufacture minivans get an increase in their wages. 16. Worldwide, there is a dramatic increase in income and living standard

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