We appreciate your visit to The federal government requires automobile manufacturers to install new anti pollution equipment that costs 2 000 per car Under what conditions can carmakers pass almost. This page offers clear insights and highlights the essential aspects of the topic. Our goal is to provide a helpful and engaging learning experience. Explore the content and find the answers you need!
Answer :
Carmakers can pass almost all of the cost of new anti-pollution equipment to car-buyers when the demand for automobiles is high and consumers are willing to pay higher prices without a significant decrease in quantity demanded.
On the other hand, carmakers can pass very little of the cost to car-buyers when the demand for automobiles is low, and consumers are more price-sensitive, resulting in a significant decrease in quantity demanded. Supply and demand diagrams can illustrate these conditions.
When the demand for automobiles is high (illustrated by a steep demand curve), carmakers have more market power and can pass almost all of the cost of new anti-pollution equipment to car-buyers.
This is because consumers are willing to pay higher prices and the quantity demanded remains relatively unchanged. In this case, the supply curve (representing the cost of production) would shift upward by the amount of the equipment cost.
Conversely, when the demand for automobiles is low (illustrated by a flatter demand curve), carmakers have less market power, and passing the cost to car-buyers becomes more challenging.
Consumers are more price-sensitive, and a significant increase in price would result in a substantial decrease in quantity demanded. In this scenario, the supply curve shifting upward by the equipment cost would lead to a higher price but a much smaller quantity demanded.
By analyzing the supply and demand dynamics, it becomes evident that the ability of carmakers to pass the cost of anti-pollution equipment to car-buyers depends on the elasticity of demand for automobiles. If demand is relatively inelastic, carmakers can shift the majority of the cost burden to consumers.
However, if demand is elastic, carmakers will have to bear a significant portion of the cost themselves to avoid a sharp decline in sales.
Learn more about steep demand curve here:
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Carmakers can pass almost all of the cost of new anti-pollution equipment to car-buyers when the demand for automobiles is high and consumers are willing to pay higher prices without a significant decrease in quantity demanded.
On the other hand, carmakers can pass very little of the cost to car-buyers when the demand for automobiles is low, and consumers are more price-sensitive, resulting in a significant decrease in quantity demanded. Supply and demand diagrams can illustrate these conditions.
When the demand for automobiles is high (illustrated by a steep demand curve), carmakers have more market power and can pass almost all of the cost of new anti-pollution equipment to car-buyers.
This is because consumers are willing to pay higher prices and the quantity demanded remains relatively unchanged. In this case, the supply curve (representing the cost of production) would shift upward by the amount of the equipment cost.
Conversely, when the demand for automobiles is low (illustrated by a flatter demand curve), carmakers have less market power, and passing the cost to car-buyers becomes more challenging.
Consumers are more price-sensitive, and a significant increase in price would result in a substantial decrease in quantity demanded. In this scenario, the supply curve shifting upward by the equipment cost would lead to a higher price but a much smaller quantity demanded.
By analyzing the supply and demand dynamics, it becomes evident that the ability of carmakers to pass the cost of anti-pollution equipment to car-buyers depends on the elasticity of demand for automobiles. If demand is relatively inelastic, carmakers can shift the majority of the cost burden to consumers.
However, if demand is elastic, carmakers will have to bear a significant portion of the cost themselves to avoid a sharp decline in sales.
Learn more about steep demand curve here:
brainly.com/question/14434713
#SPJ11
