Question

5296/discussion_topics/1111775 Отэсазэтого тортстотосаэзіп This is a graded discussion: 5 points possible due Mar 1 22 Topic 4 Discussion In 2008, the price for gas rose. Explain the effects of higher gas prices on the price of used SUVs and price of compact cars. Please answer the above question in at least 150 words. Also, comment on minimum two of your classmates' posts, at least 30 words each. Search en Unread D HTML Editor BIVA -A- IE2 1 3 x - Ge t To 12pt Paras The price of gas rising in 2008 made a huge impact on the ways people brought cars.

Answer 1

Ans) Complementary goods are those which are used together. Eg- pen and ink. Similarly, gas and SUV are complementary goods. Also, when price of complementary good increases, demand for the good in question decreases.

When price of gas increases, demand for SUV will decrease because operating SUVs will become costly.

While on other hand, demand for compact cars will increase because they are fuel efficient and can also run on electricity, which will help consumers save more money.

As a result, demand curve for SUV will shift to the left. This will decrease both price and quantity of SUV.

Whereas demand curve of compact cars will shift to the right. This will increase both price and quantity.

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