Suppose the cost of lithium-ion batteries, an input into the production of electric vehicles, has dropped more steeply than
expected. Demonstrate the effect of a reduction in the price of lithium-ion batteries on the market for electric vehicles by
answering the following questions.
a. What will happen with demand in the market for
electric vehicles?
Demand for electric vehicles will increase.
Demand for electric vehicles will decrease.
Demand for electric vehicles will not change.
b. What will happen with supply in the market for
electric vehicles?
Supply of electric vehicles will decrease.
Supply of electric vehicles will not change.
Supply of electric vehicles will increase.
c. Equilibrium price
does not change.
increases.
may increase or decrease, but it is impossible to now
for sure.
decreases.
d. Equilibrium quantity
does not change.
may increase or decrease, but it is impossible to now
for sure.
Oincreases,
decreases.