The latest electric car is expected to be released in Australia shortly at a very affordable...
The latest electric car is expected to be released in Australia shortly at a very affordable price. What impact might this have on the market for cars which run on petrol? Justify your answer.
Homework Answers
Question
It has been stated that an electric car is expected to be released in Australia at a very affordable price.
Electric car and the petrol car are substitute of each other.
So, launch of affordable electric car will induce people to buy more electric cars.
This will result in decrease in demand for petrol cars.
This decrease in demand will shift the demand curve for petrol cars to the left.
Given the supply curve of petrol cars, this leftward shift of the petrol cars will result in a decrease in the price and quantity of petrol car.
So,
In the market for petrol cars, there will be fall in price and quantity traded of petrol cars.
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