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Heilbroners Worldly Philosphers

1. People looking to trade in their old car for money off of their new car become discouraged with the low trade in value, and decide either not to buy a new car at all or to buy a cheaper model. The lower car sales is a reduction in demand, because the decrease in resale value of used cars is not changing the prices of the new cars, as a change in quantity demanded would suggest, it is changing what people are willing to pay for the cars.A graph of the new demand curve would actually be shifted to the left of the old demand curve, because the price of new cars has not changed, but the number of new cars being sold has changed.
2. Escalating consumer debt, higher interest rates, and slow growth in real income are all making it difficult for consumers to purchase cars.These factors also are not changing the price of cars, and so they are changes in demand, not quantity demanded.In other words, these factors are shifting the entire demand curve to the left.
3. Ford and Toyota are making the price of buying a new car cheaper, hoping that more people will want to purchase new cars.This is an attempt to change the quantity demanded.Ford and Toyota are hoping that their efforts will move them downward on a demand curve, hence more will people buy the less-expensive new cars.An advertising campaign.If Toyota and Ford were to start a new advertising campaign, they would be attempting to change the demand.With a new advertising campaign, the car companies are hoping that the demand curve would shift back to the right and more people would buy the cars they are making at a price that returns their profit to its original level.
Answers to “Use Your Economic Reasoning” on pages 82 & 83
1. The U.S. has already mined most of its high-quality, accessible natural resource deposits.Other countries still have many high-quality, accessible deposits of natural resources.
2. Technology is helping U.S. firms to lower costs, by in…

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