Question

You own an auto dealership that has recently been sued for selling poor quality cars. The diagram represents your demand curve before the lawsuit. You find that subsequent the lawsuit the demand for cars has decreased by 10% at any given price. What two points must the new demand curve pass through?

($20,000, 90) and ($15,000, 180)

($18,000, 90) and ($13,500, 180)

($20,000, 100) and ($15,000, 200) Demand for Cars $21.00 $20.00 $19.00 $18.00 $17.00 S 16.00 E $15.00 $14.00 $13.00 OL 80 100 120 140 160 200 220 Quantity Demanded

Answer 1

The new demand curve must pass through ($18000,90) and ($13500,180) because after lawsuit the demand shall fall by 10% and so will prices fall by 10% from original demand curve.