b. An improvement in product quality is treated as an increase in tastes or preferences, meaning

consumers demand more paint at any price level, so demand increases or shifts to the right. If this

seems counterintuitive, note that demand in the future for the longer-lasting paint will fall, since

consumers are essentially shifting demand from the future to the present.

c. An increase in need causes an increase in demand or a rightward shift in the demand curve.

d. Factory damage means that firms are unable to supply as much in the present. Technically, this is an

increase in the cost of production. Either way you look at it, the supply curve shifts to the left.

4. a. More fuel-efficient cars means there is less need for gasoline. This causes a leftward shift in the

demand for gasoline and thus oil. Since the demand curve is shifting down the supply curve, the

equilibrium price and quantity both fall.
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