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1.3 Price determination in a competitive market

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Question 1

The diagram below shows the demand (DDD) and supply (SSS) curves for electric vehicles (EVs).

Initial market equilibrium is at point E, the intersection of D1 D_1\,D1​ and S1S_1S1​.

Demand and Supply curves for Electric Vehicles

The government announces a reduction in the indirect tax (VAT) on electric vehicles and an increase in the fuel duty on diesel vehicles (a substitute for electric vehicles).

Which one of the following is most likely to be the new equilibrium in the market for electric vehicles?

V

W

X

Y

1.3 Price determination in a competitive market Questions

  1. A Level
  2. /Economics
  3. /1.3 Price determination in a competitive market