true or false The price of oil is decreasing in the international oil markets. We should...

true or false The price of oil is decreasing in the international oil markets. We should expect that the demand for cars will shift to the left. and Explain why?

Expert Solution

Answer.

Oil and Cars are complementary goods. complementary goods are those goods which increase in the price of a good reduces the demand for its comlement and decrease in the price of a commodity increases the demand for its complement. When the price of oil is decreasing in the international oil markets. The demand for cars increases. This can be sjown in the followinf figure;

In the above figure, x-axis shows quantity and y-axis shows price. D is the demand curve and S is the supply curve. As the result of the price of oil is decreasing in the international oil markets, the demand for cars increases, the demand curve shift to the right. The price increases from p to p1 and quantity aso increases from q to q1.

Rahul Sunny answered 1 year ago

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