The price of gasoline decrease permanently and gasoline sales increase in the short term and car sales increase in the long term. Explain why and include diagrams if necessary, Thanks!
Answer -
Car and gasoline are the complementary goods.Both are equally important for purpose of transport.Change in price of one good affects the demand of other good.
In the given case if the price of gasoline decreses the demand for it increases and its sale will also increase for the short term..Because of this people are interested to buy more cars as price of gasoline would decrease, the expenses of fuel consumption will also decrease.so demand for car increases and its sale increases in the long run.
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