Answer to Question #61221 in Economics for Serenamay Matthews

Question

a. There has been a breakthrough in the manufacturing of solar-powered motor vehicles that will substantially reduce their costs of production. Use demand and supply curves to illustrate what will happen to:
i) the equilibrium price and quantity of solar-powered motor vehicles.
ii) the equilibrium price and quantity of conventional motor vehicles.


b. In an attempt to increase the use of solar-powered motor vehicles the government decides to set a minimum price for solar-powered vehicles that is below the market price. Do you think this is a good idea? Explain your decision using graphs.
(with diagrams)