11. Which of the following results from an increase in the price of a one-week vacation at beach resorts on the coast of Mexico?
a. An increase in the supply of bicycle tires in Toledo, Ohio.
b. An increase in the demand for vacations at resorts on Caribbean islands.
c. An increase in the supply of vacation opportunities at resorts on the coast of Mexico.
d. A decrease in the demand for vacations at resorts on Caribbean islands.
ANS
a. Incorrect. There is no obvious relationship between vacations at Mexican beach resorts and the supply of bicycle tires in Toledo.
b. Correct. The Caribbean and Mexico are substitutes in the market for tropical resort vacations, and when the price of Mexican vacations rises, some people who were considering going to Mexico will instead go to a Caribbean island.
c. Incorrect. An increase in price moves us along a given supply curve, but does not result in an increase in supply.
d. Incorrect. The effect is just the opposite.