Question

The graph below depicts the market for cars. a. Use the diagram below to illustrate an increase in the price of steel Instructions: Use the tool provided 'New line' to draw a new line that reflects the market effect of this event. Plot only the endpoints of the line. Market for Cars Tools New line D, Quantity of cars b. If the price of steel increases, the ((Click to select) and the equillbrium quantity to Click to selectl cars will Click to selecty 9. This will cause the equilibrium price to Click to select)

Answer 1

(a) Increase in price of steel will increase the cost of input, causing firms to decrease output. Supply will fall, shifting supply curve leftward to S2.

(b) If price of steel increases, supply of cars will decrease. This will cause price to increase and quantity to decrease.

Market for Cars Tools S2 s, New line P. D1 Q, Quantity of cars

Answer 2

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