Question

How have the recent increases in the price of gasoline affected the market for hybrid cars?

The demand and supply of hybrid cars have both increased in response to changing gas prices, so the equilibrium quantity has definitely decreased, but the effect on price cannot be determined without more information.

The demand has increased, increasing the equilibrium price and quantity of hybrid cars.

The demand has increased, decreasing the equilibrium price and increasing the equilibrium quantity of hybrid cars.

The supply has increased, decreasing the equilibrium price and increasing the equilibrium quantity of hybrid cars.

Answer 1

With the rise in the price of gasoline, people are looking to shift to a cheaper fuel.

Hybrid cars helps to reduce the consumption of gasoline and thus lower the operating costs as compared to pure gasoline cars. So there is an increased demand of hybrid cars. This has led to a jump in the equilibrium price and quantity of hybrid cars as the demand curve has shifted to the right. So the correct answer is

The demand has increased, increasing the equilibrium price and quantity of hybrid cars.

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