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Answer :
The introduction of a new law mandating an increase in the required levels of automobile insurance would lead to a decrease in the equilibrium price and quantity in the market for new automobiles, due to the complementary nature of cars and car insurance.
The introduction of a new law mandating an increase in the required levels of automobile insurance is bound to affect the equilibrium price and quantity in the market for new automobiles.
Below is an explanation
:Explanation
The new law mandating an increase in the required levels of automobile insurance would imply that consumers would be paying more money for their insurance premiums. This increase in price would most likely lead to a decrease in the demand for cars. This is because the increase in the price of automobile insurance would lead to a decrease in the demand for complement goods like cars.
Consequently, this decrease in demand would lead to a leftward shift of the demand curve. The outcome of this leftward shift would be a decrease in both the equilibrium price and quantity in the market for new automobiles.
In conclusion, the introduction of a new law mandating an increase in the required levels of automobile insurance would lead to a decrease in the equilibrium price and quantity in the market for new automobiles, due to the complementary nature of cars and car insurance.
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