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Microeconomics

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Determinants of Supply and Demand: The Carmaker's Dilemma

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MICRO-T4K4FE

Most car factories could be easily and cheaply be refitted to produce construction equipment instead, without having to retrain the workers. Similarly, most construction equipment factories could be easily and cheaply be refitted to produce cars instead. This refitting is so cheap that factory owners could consider it as basically costing nothing at all.

If the price of construction equipment goes up, what will happen to the market for cars?

A

The supply curve for cars will shift left.

B

The supply curve for cars will shift right.

C

A demand shift will cause car prices to rise.

D

Nothing will change.