Steel is an important input to the production of cars. Tires and cars are used together by consumers. What will occur in the market for tires when there is an increase in the price of steel?

Question

Quizplus · Accepted Answer

An increase in the price of steel raises the cost of producing cars, leading to a decrease in the supply of cars. This results in a decrease in the demand for tires, as fewer cars are being produced and sold, causing both the price and quantity of tires to fall.

Steel Is an Important Input to the Production of Cars