Question

During the Obama administration, the development of low-cost batteries for electric cars received large amounts of federal funding in terms of subsidies. Meanwhile, American households gave a higher priority towards minimizing their environmental impact. Consider the market for zero-emissions electric vehicles where there is an upward-sloping supply curve and a downward-sloping demand curve. Which direction will demand and supply shift? Both curves will shift left. Both curves will shift right. Demand will shift right and supply will shift left. Demand will shift left and supply will shift right. What will happen to the equilibrium price? Change is ambiguous. Price decreases. Price remains constant. Price increases. What will happen to the equilibrium quantity? Quantity remains constant. Quantity increases. Quantity decreases. Change is ambiguous

Answer 1

The demand and the supply for zero-emissions electric vehicles will both shift right due to federal funding for low-cost battery development and households' environmental priorities. This results in an ambiguous effect on equilibrium price but generally leads to an increase in equilibrium quantity.

Step-by-step explanation:

Considering the market for zero-emissions electric vehicles with an upward-sloping supply curve and a downward-sloping demand curve, the influx of federal funding targeted at developing low-cost batteries for electric cars would likely increase the supply of these vehicles, shifting the supply curve to the right. Concurrently, as American households prioritize minimizing their environmental impact, the demand for zero-emissions electric vehicles will increase, hence the demand will shift to the right.

As both the demand and the supply curves shift to the right, the effect on equilibrium price is ambiguous without further information about the magnitude of the shifts. However, the increase in both supply and demand generally leads to a higher equilibrium quantity, provided the shifts are of similar scales.

Answer 2

The demand and supply curve will both shift to the right.

The change in price is ambiguous.

The quantity will increase.

Step-by-step explanation:

As the government provides subsidies to zero-emission vehicles. The cost of production for such vehicles producing firms will decline. This will cause an increase in supply as the firms will be able to produce more at the same cost. This will cause an increase in supply shown by a rightward shift in the supply curve.

As there is a higher priority among households to reduce their environmental impact. They will demand more of these vehicles. This will cause an increase in demand indicated by a rightward shift in the demand curve.

The rightward shifts in both demand and supply curve will cause an increase in the equilibrium quantity of the commodity.

The change in price level depends upon the extent of the increase in demand and supply.