Answered: If the gasoline price remains low and…

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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If the gasoline price remains low and the gas engine becomes more efficient for all kinds of models, what will be the possible impact on the U.S. market price of Tesla Model X? Please explain your answer in the language of economics.

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Step 1

Gasoline and cars are considered to be complementary goods. The cars that run on gasoline cannot be operated with any other fuel and that makes them complementary goods. Electric cars and gasoline cars are substitutes for each other. The consumer can either use gasoline-powered cars or electric-powered cars. The power terrains are different for these models and it’s the decision of the consumer to choose amongst them.

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