question 3 of 15 the price of suvs, a substitute - in - production for sedans, has increased over the last…

question 3 of 15 the price of suvs, a substitute - in - production for sedans, has increased over the last year. show the effect of this event on the market for sedans by shifting the appropriate curve in the graph shown. what is the new price? $ thousand what is the new quantity? million market for sedans 50 45 supply 40 35 price($ thousand) 30 25 20 15 10 demand 5 0 0 1 2 3 4 5 6 7 8 9 10 quantity in millions of cars

question 3 of 15 the price of suvs, a substitute - in - production for sedans, has increased over the last year. show the effect of this event on the market for sedans by shifting the appropriate curve in the graph shown. what is the new price? $ thousand what is the new quantity? million market for sedans 50 45 supply 40 35 price($ thousand) 30 25 20 15 10 demand 5 0 0 1 2 3 4 5 6 7 8 9 10 quantity in millions of cars

Answer

Explanation:

Step1: Analyze supply - side change

When the price of SUVs (a substitute - in - production for sedans) increases, producers will shift production towards SUVs. So, the supply of sedans decreases. The supply curve of sedans shifts to the left.

Step2: Find new equilibrium

The left - shift of the supply curve will intersect the demand curve at a new point. At this new equilibrium, the price is higher and the quantity is lower compared to the initial equilibrium. Assume the initial equilibrium is at the intersection of the original supply and demand curves. After the supply curve shifts left, if we assume the new intersection point (new equilibrium) on the graph: Let's say by observing the graph, if the new equilibrium price is at the grid value of 30 (in thousands) and the new equilibrium quantity is at 4 (in millions).

Answer:

New price: $30$ thousand New quantity: $4$ million