Suppose the price of gasoline has recently increased. How will this affect the market for hybrid cars?
A) The demand for hybrid cars will increase, increasing the equilibrium price and quantity of hybrid cars.
B) The supply of hybrid cars will increase, decreasing the equilibrium price and increasing the equilibrium quantity of hybrid cars.
C) The demand for hybrid cars will increase, decreasing the equilibrium price and increasing the equilibrium quantity of hybrid cars.
D) The demand for and supply of hybrid cars will increase, decreasing the equilibrium quantity, but the effect on price cannot be determined without more information.

Question

Quizplus · Accepted Answer

When the price of gasoline increases, consumers are more likely to seek fuel-efficient alternatives, such as hybrid cars. This increases the demand for hybrid cars, leading to a higher equilibrium price and quantity in the market for hybrid cars.

Suppose the Price of Gasoline Has Recently Increased