Answer to Question #228729 in Economics of Enterprise for joker

Question

A Mechanic Engineer warns that new Toyota cars overheats during long journeys.

Answer 1

complete question:For each of the following statements, draw a diagram that illustrates the likely effect on the market for Toyota cars. Indicate in each case the impact on equilibrium price and equilibrium quantity with full explanation.

a. A Mechanic Engineer warns that new Toyota cars overheats during long journeys. ( 2 marks)

solution

the price will decrease from P0 to P1. Due to the overheating effect, it is automatic that the quantity will have to be reduced due to reduction in quantity demanded. Makes the Equilibrium to shift from E0 to E1.