The introduction of new hybrid automobiles in the automobiles industry will shift the supply curve to the right. Similarly, the consumers will have excitement over the new hybrid automobiles, which are more efficient than the current ones. This means that the demand for the new hybrid automobiles will also increase, shifting the demand curve to the right.
This indicates that the change in the price level will depend on the degree of shift in the supply and demand for the new automobiles, but the equilibrium quantity will increase due to the outward shift of the point of equilibrium.
When income of consumers increases, the purchasing power will increase, making the demand curve shift rightwards. Since the supply is constant, both equilibrium price and quantity will increase.
A decrease in the cost of borrowing will increase the purchasing power of consumers. This increases demand for the automobiles at constant supply. There will be a shift in the equilibrium price and quantity as in the diagram for the increase in income.
When the price of batteries in the production of these vehicles decreases, the supply of automobiles will increase. At constant demand, the equilibrium price will reduce. The equilibrium quantity will increase.
A reduction in gasoline prices will lead to a shift of the demand curve to the right. People will demand more automobiles than before due to the low cost of gasoline, which is a complimentary commodity. Equilibrium price and quantity will rise.
Price Elasticity and Inelasticity
A Box of Cereals Sold In a Grocery Store
This is a price inelastic, since it is a basic need. A change in the price level will not affect the demand from consumers.
Gasoline as a Commodity
Gasoline is price inelastic as it is a key requirement in the automobiles industry. A small change in price will not affect the quantity that consumers demand.
Gasoline at a Local Gasoline Station
This is a price elastic commodity. Stations from other parts offer the same commodity at relatively lower prices than the local gas station.
Fast Food Sold at a Restaurant
It is price elastic since people have other options of accessing similar food, either at other restaurants or in their homes.
Hotel Rooms for People Planning a Vacation
Price elastic, since these people have the time to search for alternative hotel rooms that offer similar services at lower prices than the high price hotel.
Hotel rooms for people on business to meet an important client
They are price inelastic because of the urgency of the event of the people demanding the hotel rooms.
Clothes Sold In a Discount Retailer
They are price elastic because clothes are not basic needs, and people can get similar clothes at other shops in town.