Question

2) Consider the market for minivans. If the price of sport utility vehicles decreases, then which...

2) Consider the market for minivans. If the price of sport utility vehicles decreases, then which of the following statements regarding the market for minivans is correct?

Supply will increase

Supply will decrease

Demand will increase

Demand will decrease
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Answer #1

2) Consider the market for minivans. If the price of sport utility vehicles decreases, then which of the following statements regarding the market for minivans is correct?

Ans:-  Demand will decrease

Reason:- Minivans and Sports are substitute goods. In case of sunstitute goods, if price of one good decreases then people will buy more of the good as they get it at less price and this will result in fall in demand of the other good.

In this case also if price of Sports utility cars fall people will prefer to buy more SUV and demand for minivans will decrease in the market

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