Consider the following statements, based on a positive economic analysis that assumes that all other things remain constant. For each, list one other thing that might change and thus offset the outcome stated. a. Increased demand for laptop computers will drive up their priceb. Falling gasoline prices will result in additional vacation travel. c. reduction of income tax rates will result in more people working.

The answer is

A. Increasein supply of laptop

B. Increase in hotel taxes

C. Reduction in wages or salary paid

Explanation:

A. To offset the outcome: Increase in supply of laptop will neutralize the increase in price due to high demand. The market forced will automatically drive the price laptop down.

B. To offset the outcome: Increase in hotel taxes will drive the price of hotel lodging up because this increase will be passed to the consumers(traveller) and discourage vacation travel

C. To offset the outcome: Reduction in wages or salary paid will discourage people from working. This satisfies law of supply (At lower price(wages), less will be supplied/produced(the supplied factor of production,labor)

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