Question

During the Obama administration, the development of low-cost batteries for electric cars received large amounts of federal funding via 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. In which direction will demand and supply shift?

a. Both curves will shift left.
b. Both curves will shift right.
c. Demand will shift right, and supply will shift left.
d. Demand will shift left, and supply will shift right

Answer 1

B) Both curves will shift right.

Step-by-step explanation:

The supply curve will shift to the right because subsidies have a similar effect to a decrease in production costs. The supply curve will shift to the right increasing the quantity supplied at every price level.

The demand curve will shift to the right because a change in consumers' priorities increased total demand. This rightward shift will increase the quantity demanded at every price level.

In aggregate terms, the quantity demanded will definitely increase, while the effect on prices is uncertain because one shift (supply curve) will decrease equilibrium price, while the other shift (demand curve) will increase equilibrium price.

Answer 2

b. Both curves will shift right.

Step-by-step explanation:

Since the Obama administration is actively working on the development of low cost batteries for electric cars by giving subsidies, it will move the supply curve to the right as the supply of low cost batteries will increase.

On the other hand the demand curve will also shift to the right because the demand for the electric cars will increase as it is evident in the question that American households are giving high priority towards the minimization of their environmental effects.

Hope this helps you. Thank You.