Final answer:
The reduction in electric car prices despite increasing demand can be explained by advancements in production technology, economies of scale, and reductions in battery costs which all contribute to a downward shift in the supply curve, leading to lower prices.
Step-by-step explanation:
The demand for electric cars is rising, yet the prices are decreasing. This situation can be explained by various factors influencing the demand and supply dynamics in the market for electric vehicles. Increases in demand may be due to a growing environmental consciousness, technological advancements, and governmental policies encouraging electric vehicle adoption.
On the supply side, factors contributing to lowering prices can include improvements in technology, which reduce the cost of production, economies of scale as more units are produced, and a decrease in battery costs. Moreover, carmakers facing elastic demand might lower prices to increase sales volume, especially if the consumers are price-sensitive.
In some cases, when new technologies advance and production processes become more efficient, the supply curve can shift to the right, resulting in lower prices despite increased demand. This shift can occur alongside market expansion and does not necessarily contradict the basic law of demand and supply.