Question

Uncle SamWants Your Car $4500:00 The Car Allowance Rebate System (CARS), colloquially known as "cash for clunkers", was a $3 billion Federal program in 2009 intended to provide economic incentives to U.S. residents to purchase new, more fuel-efficient cars and get rid of their older "clunkers" that polluted the environment. Potential buyers were given a credit up to $4,500 to buy a new car, while trading in their older less fuel-efficient car, which was then destroyed (turned into scrap metal). The program was promoted as providing stimulus to the economy by boosting auto sales, while putting safer, cleaner, and more fuel-efficient vehicles on the roadways Some economists have criticized the program for its negative effect on poor people. How could the program have a negative effect on poor people? Answer this question by using a supply and demand model, and explain how the program affects the equilibrium price and equilibrium quantity of used cars. Draw a supply and demand diagram and show what happens to the euilibrium price and equllbrium quantity in the market for used cars Make sure you label your graph correctly. Look carefully at the supply and demand graphs in Figure 3.10 in Chapter 3. The graph you should use is after this program is implemented the one showing a reduction in supply. Be sure to label the equilibrium changes, E, and E" as in the graph. Send a picture or scanned image through Canvas of your drawn graph. You can click on the picture icon ("embed image") in the content-box of your reply to upload your photo or scanned document into your message Or you can send it as an attachment with your post in Canvas (see the two Canvas guides on embedding or attaching files in Canvas as a student, in this module] In accordance with the syllabus, the student is responsible for providing a legible image. Do not send via email.

Answer 1

The CARS PY»*3 Cleam emu*rom old cans amd n used cax manlce), Nens SnpP' old suPP Sppwsed cast fallina in 4na ued 2. SWPP Demomd Sん demand ar SWovwr old wad cau mises fron Pi -+0 P2 Foor people,who highrr Pmice the pmice of la nsed cars