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19 January, 04:04

What will happen to the equilibrium price and quantity of new cars if the price of gasoline rises, the price of steel rises, public transportation becomes cheaper and more comfortable, and auto-workers negotiate higher wages?

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  1. 19 January, 07:52
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    The price will rise and quantity falls as well.

    Suppliers will leave the market and move into a more profitable market.

    Explanation:

    The input price (gasoline, wages, and stell) will go up, thus increasing the price. As the supplier makes a car for again.

    The substitution for public transport will come from both ways: one as the price of car increases because of their input prices increase and also, as the alternative increases their quality. This makes demand to shift to the left, decreasing, even more, the quantity

    In the end, all these are a negative effect on the car market. So the activity will decrease and suppliers will leave the market into others.
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