Say the following 2 events occur at the same time: 1) a decrease in the price of steel, an input in the production of cars; 2) an increase in the price of gasoline, a complement of cars. The following 2 events would lead to a(n) _________ in the market price and a(n) __________ in the market quantity of cars.1 pointincrease; indefinite changeindefinite change; indefinite changeindefinite change; decreaseindefinite change; increasedecrease; indefinite change
Question
Say the following 2 events occur at the same time: 1) a decrease in the price of steel, an input in the production of cars; 2) an increase in the price of gasoline, a complement of cars. The following 2 events would lead to a(n) _________ in the market price and a(n) __________ in the market quantity of cars.1 pointincrease; indefinite changeindefinite change; indefinite changeindefinite change; decreaseindefinite change; increasedecrease; indefinite change
Solution
The two events described would lead to an "indefinite change" in the market price and a "decrease" in the market quantity of cars.
Here's why:
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A decrease in the price of steel, an input in the production of cars, would lower the cost of producing cars. This could potentially lead to a decrease in the market price of cars as manufacturers may pass on the cost savings to consumers. However, this is not guaranteed as manufacturers may choose to keep prices the same and instead increase their profit margins. Hence, the change in market price is "indefinite".
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An increase in the price of gasoline, a complement of cars, would make owning and operating a car more expensive. This would likely decrease the demand for cars, leading to a "decrease" in the market quantity of cars.
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