Economics: The Basics 1st Edition by Mike Mandel

Exercise 4

A local auto dealer runs a special promotion and offers auto loans at only 1 percent interest for anyone who buys a particular new model of car. For all other models, the interest rate stays at 5 percent.
a) When the promotion starts, will the quantity sold of these new models rise or fall? Show your answer using a supply-demand diagram. (Hint: What happens to the demand curve when the promotion starts?)b) Will the quantity sold of other models rise or fall? Show your answer using a supply-demand diagram.