rest of the homework

Champagne

AD (a) The demand can decrease as there are more and more substitutes of champagne on the market

AD (b) The mechanization of some part of production and possible expansion of area which could be recognized as producing champagne.

Bicycles

AD (a) The growth of demand for cars, caused by the economic growth in last years in China, effected in change in traffic, as there are much more cars than there were before.

AD (b) I would expect that the income elasticity for bikes is negative, because the bikes tend to be an inferior good – as the income grows, the demand for bikes contracts.

AD (c) I would think it is positive, as the growth in income causes increase in demand for cars.