13. Suppose you know that incomes in the US have increased but that most of this increase occurred in the Midwestern part of the US. Based on this information alone, what would you expect has been happening to equilibrium prices and quantities sold of new cars in the Midwest during this period of increasing incomes.
- Equilibrium prices have probably been rising and quantities falling
since supply of new cars is probably inelastic.
- Equilibrium prices have probably been rising and quantities falling
since demand for new cars is probably price and income inelastic.
- Equilibrium prices have probably been rising and quantities increasing
since income elasticity of demand for new cars is probably positive
and greater than one.
- Equilibrium prices have probably been falling and quantities increasing
since income elasticity of demand for new cars is probably negative.
- Equilibrium prices have probably been falling and quantities falling
since cross price elasticity of demand for new cars with respect
to income is probably negative.
Copyright © 1995-2004 OnLineTexts.com, Inc. - All Rights Reserved