Answer to Question #302974 in Economics of Enterprise for Masum

Question

What effect will each of the following have on the demand for small automobiles such

as the Mini-Cooper and Smart car? Answer with graph.

iv. Consumers anticipate that the price of small autos will greatly come down in the

near future.

v. The price of gasoline substantially drops.

Answer 1

iv) The demand will reduce as the buyers are waiting for the prices to drop so that they can purchase at a cheaper price.

v) If the price of gasoline substantially drops - demand will increase, as cars and gasoline are complements