Answer to Question #209801 in Economics for Paballo

Question

If the demand for motor vehicles decreases due to a drop in consumer income and at the same time increases in factor prices cause the supply of motor vehicles to decrease, the prices of motor vehicles will

•  A. increase.
•  B. remain the same.
•  C. be impossible to determine from the information given.
•  D. decrease.

Answer 1

If the demand for motor vehicles decreases due to a drop in consumer income and at the same time increases in factor prices cause the supply of motor vehicles to decrease, the prices of motor vehicles will be impossible to determine from the information given, because it can either increase or decrease depending on the slopes of supply and demand curves.

So, the correct answer is C.