Suppose two events occur simultaneously in the market for automobiles: an improvement in assembly line technology and the economy enters a recession (which decreases consumers' income).What is likely to happen to equilibrium price?

Question

Quizplus · Accepted Answer

A recession decreases consumers' income, leading to a decrease in demand and thus a leftward shift in the demand curve. At the same time, an improvement in assembly line technology leads to increased supply, resulting in a rightward shift in the supply curve. The intersection of the two new curves will result in a lower equilibrium price. Therefore, price will fall.

Suppose Two Events Occur Simultaneously in the Market for Automobiles