An increase in input costs in the production of electric automobiles caused the price of electric automobiles to rise. Holding everything else constant, how would this affect the market for gasoline-powered automobiles (a substitute for electric
automobiles)?
A) The supply of gasoline-powered automobiles would increase and the equilibrium price of gasoline-powered automobiles would decrease.
B) The demand for gasoline-powered automobiles would increase and the equilibrium price of gasoline-powered automobiles would increase.
C) The demand for gasoline-powered automobiles would decrease because consumers could afford to buy fewer gasoline-powered automobiles.
D) The demand for gasoline-powered automobiles would increase and the equilibrium price of gasoline-powered automobiles would decrease.
Answer: B
You might also like to view...
The aggregate expenditure line is upward sloping since as GDP increases,
A) consumption increases B) investment increases C) government purchases increase D) net exports increase
Susan says, "If the price of wool coats goes up, suppliers will offer more of the coats for sale." Brad replies, "It takes three months to harvest wool and employ all the steps necessary to produce a wool coat. Quantity supplied cannot possibly increase for three months." Is Brad correct? Why or why not?