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Which of the following will cause an increase in the demand for autos? a
Which of the following will cause an increase in the demand for autos?
a. Price of car tires decrease because of a Malaysian rubber surplus.
b. Concrete steel reinforcing rods are replaced by aluminum along the Atlantic Coast to prevent rusting.
c. Gasoline prices drop by 0% when OPEC nations increase production.
d. McDonald?s increases it?s hamburger production in response to consumer trends.
Expert Solution
a. Price of car tires decrease because of a Malaysian rubber surplus.
Car tires and autos are complements. Complements are products which are used together. For complement goods, the price of one product is indirectly correlated to the demand for another good. That is, an increase in the price of a good cause a decline in demand for another good and a decline in the price of one good causes an increase in demand for another good. In this scenario, when the price of car tires declines, the demand for autos will increase. Normally, when the demand for a product increases, the equilibrium price and equilibrium quantity increase, ceteris paribus.
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