Answer to Question #73652 in Microeconomics for juhi
(a) First, draw a diagram showing what happens in the Australian petrol market (4 marks).
(b) Then, draw another diagram showing what happens in the Australian used (second-hand) Holden Commodore market (6 marks). Hint: Think carefully what happens to the supply curve as well as what happens to the demand curve.
(a) In the Australian petrol market the supply of petrol will decrease, so the equilibrium price for petrol will increase, the equilibrium quantity will decrease.
(b) In the Australian used (second-hand) Holden Commodore market the supply will not change, but the demand will decrease according to increase in price for petrol, because such cars and petrol are complements, so the equilibrium price for Holden Commodores will decrease, the equilibrium quantity will decrease too.
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