Answer to Question #200724 in Microeconomics for Dhruv Jiwan

Question

Explain using the demand and supply analysis, the impact on the market for the cars as more people come to our country and at the same time the cost of the steel needed to make the cars decreases. Clearly state the effect on demand and supply and whether equilibrium price and/or quantity have increased, decreased or whether the outcome is uncertain.

Answer 1

As more people come in the country, the demand for cars will automatically increase since despite the population, there must be a certain percentage of such individuals who will need cars. As the cost of steel decreases, the supply will also increase as the developers will take advantage of the situation. With increase in demand, the equilibrium price and quantity will rise.