Exhibit 3-3 Demand curves

-Which of the graphs in Exhibit 3-3 depicts the effect of a decrease in the price of domestic cars on the demand for foreign cars?

Question

Exhibit 3-3 Demand curves

-Which of the graphs in Exhibit 3-3 depicts the effect of a decrease in the price of domestic cars on the demand for foreign cars?

Quizplus · Accepted Answer

Graph C would show a decrease in the demand for foreign cars as a result of a decrease in the price of domestic cars. This is because domestic and foreign cars are substitutes; thus, if domestic cars become cheaper, people are likely to buy more domestic cars and fewer foreign cars, shifting the demand curve for foreign cars to the left.

Exhibit 3-3 Demand Curves