Question

Suppose that in 2007 Ford sold 500,000 Mustangs at an average price of $18,800 per car; in 2008, 600,000 Mustangs were sold at an average price of $19,500 per car. These statements:

A. suggest that the demand for Mustangs decreased between 2007 and 2008.
B. suggest that the supply of Mustangs must have increased between 2007 and 2008.
C. suggest that the demand for Mustangs increased between 2007 and 2008.
D. constitute an exception to the law of demand in that they suggest an upsloping demand curve.

Answer 1

The statements suggest that the demand for Mustangs increased between 2007 and 2008. The law of demand does not apply in this scenario.

Step-by-step explanation:

The statements suggest that the demand for Mustangs increased between 2007 and 2008. This conclusion can be drawn by comparing the number of cars sold (500,000 in 2007 and 600,000 in 2008) and the average price per car ($18,800 in 2007 and $19,500 in 2008).

According to the law of demand, when the price of a product increases, the quantity demanded decreases. However, the opposite is true in this scenario. The increase in both the number of cars sold and the average price per car indicates an increase in demand for Mustangs.

The statements do not provide any information about the supply of Mustangs, so we cannot draw any conclusions about the supply based on this information.