Final answer:
In a perfectly competitive market for car batteries, as demand increases due to more battery-powered cars being made, prices are expected to rise in the short run. However, in the long run, as the market adjusts with increased supply, prices may return to their original level or even decrease.
Step-by-step explanation:
The question pertains to the effects on the price of car batteries in the context of a perfectly competitive market where all car batteries are alike and the rise of electric vehicle production is increasing demand. In the perfect competition market structure, firms are price takers due to the homogeneity of products and the presence of numerous sellers and buyers which makes the market highly competitive. As more auto manufacturers make battery-powered cars, the demand for car batteries will rise in the short run. Given that price and quantity in most markets are more inelastic in the short run, this increased demand would lead to an increase in price. However, in the long run, both supply and demand are more elastic as firms can adjust their production levels and consumers can adjust their preferences or consumption patterns. As the industry adjusts to the increased demand, more suppliers may enter the market due to the attractiveness of the higher prices, or existing suppliers may increase their capacity, leading to greater quantities supplied which could eventually lower the price. Therefore, the price is expected to rise in the short run but potentially return to its original level or even fall below it in the long run once the market adjusts and supply increases to meet the higher demand.