(Solved): 3. Determinants of demand The following graph shows the demand curve for sedans in New York City. F ...

3. Determinants of demand The following graph shows the demand curve for sedans in New York City. For simplicity, assume that all sedans are identical and sell for the same. price. Initially, the graph shows market demand under the following drcumstances: Average household income is $$\$50,000$$ per year, the price of a gallon of regular unleaded gas is $$\$4$$ per gallon, and the price of a subway ride is $$\$3.00$$. Use the graph input tool to help you answer the following questions. You will not be graded on any changes you make to this graph. Note: Once you enter a value in a white field, the graph and any corresponding amounts in each grey field will change accordingly. Consider the graph. Suppose that the price of a sedan decreased from $$\$20,000$$ to $$\$15,000$$. This would cause a the demand curve. An increase in average income causes a rightward the demand curve; therefore, you may conclude that sedars are good. (Hint: Try substituting different values for Average Income in the graph input tool and observing what happens.) Suppose that the price of a galion of gas falis from $$\$4.00$$ to $$\$3.00$$. Because sedans and gasoline are a decrease in the price of a gallon of gas shifts the demand curve for sedans to the