New cars are normal goods. What will happen to the equilibrium price of new cars if the price of gasoline rises, the price of steel falls, public transportation becomes cheaper and more comfortable, auto workers accept lower wages, and automobile insurance becomes more expensive?

Question

Quizplus · Accepted Answer

The demand for new cars will decrease due to higher gasoline prices, cheaper and more comfortable public transportation, and more expensive automobile insurance. The supply of new cars will increase due to lower steel prices and lower wages for auto workers. With decreased demand and increased supply, the equilibrium price of new cars will fall.

New Cars Are Normal Goods