Suppose the demand for large (and therefore high-gasoline consumption) cars decreases sharply during an energy crisis. The most likely market adjustment would be
A) a sharp rise in the price of large cars in the short run as people rush to purchase these vehicles before producers cut back on manufacturing them.
B) a moderate increase in short-run prices, followed by a larger long-run price increase as the supply of large cars is depleted.
C) lower short-run prices, which will lead to an expansion in the number of large cars sold.
D) a decrease in the price of large cars in the short run, leading to a reduction in output, which will moderate the price decline in the long run.

Question

Quizplus · Accepted Answer

During an energy crisis, the demand for large cars decreases, leading to a decrease in their price in the short run. This price decrease will result in reduced production, which will eventually moderate the price decline in the long run as supply adjusts to the lower demand.

Suppose the Demand for Large (And Therefore High-Gasoline Consumption) Cars