Answer to Question #248757 in Macroeconomics for Lys

Question

Due to several supply-chain issues the price of computer chips has risen in recent months. How does this change affect the price of automobiles that require many computer chips in their manufacture?

Answer 1

No discounts. With consumer demand for wheels still high, automakers feel little pressure to discount their vehicles. Forced to conserve their scarce computer chips, the automakers have routed them to higher-priced models — pickup trucks and large SUVs, for example — thereby driving up their average prices.

Prices are expected to stabilize in the fall, but the computer chip shortage will play a role in the prices normalizing. Decreased supply in fleet sales, repossessions, and off-lease cars entering the used market is shrinking the supply.