Assignment:
Consider the market for child car safety seats.
a. Do you think the price elasticity of demand for safety seats is likely to be fairly high or fairly low?
b. Suppose new discoveries cause the amounts of metal, plastic, and other inputs needed to produce a safety seat to fall. How would you expect this to affect the market price and quantity of safety seats? What would you expect to happen to total spending on safety seats?
c. Suppose many states pass laws increasing the maximum age at which children are required to be in safety seats. How would you expect this to affect the market price and quantity of safety seats? What would you expect to happen to total spending on safety seats?
d. Suppose the government imposes a binding price ceiling on safety seats. How would you expect this to affect the market price and quantity of safety seats? Will there be a shortage or a surplus of safety seats? What would you expect to happen to total spending on safety seats?