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Demand Curves and Shifts

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The demand for new motor homes in the United States is highly cyclical and sensitive to diesel fuel prices and interest rates. Given these characteristics, describe the effect of each of the following on the quantity demanded or the demand for new motor homes. Indicate whether the effect of each of the following is an upward or downward movement along a given demand curve or instead involves an outward or inward shift in the relevant demand curve for new motor homes. Why?
- decrease in the average price of new motor homes?
- increased fear of traveling by air because of terrorist threats?
- fall in the price of diesel fuel (used in many motor homes) because of a peaceful resolution of the war in Iraq?
- significant rise in advertising by cruise ship operators?

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The demand for new motorhomes in the United States is highly cyclical and sensitive to diesel fuel prices and interest rates. Given these characteristics, describe the effect of each of the following on the quantity demanded or the demand for new motorhomes. Indicate whether the effect of each of the following is an upward or downward movement along a given demand curve or instead involves an outward or inward shift in the relevant demand curve for new motorhomes. Why?

- decrease in the average price of new motorhomes?

This will involve a downward movement along the demand curve for motorhomes - as price decreased, quantity demanded of motorhomes will increase. This is an application of the law of demand. This relationship is inverse or indirect because as price gets higher, people want less of a particular product. This inverse relationship is almost always found in studies of particular products, and its very widespread occurrence has given it a special name: the law of demand. The word "law" in this case does not refer to a bill that the government has passed but to an observed regularity.

- increased fear of traveling by air because of terrorist threats?

Assuming that traveling by air is a substitute good to traveling with motorhomes, holding everything else constant, if there is an increased fear ...

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