There has been a strong increase in global demand for semiconductors from around Q3 2020 to Q3 2021, which has led to inventory shortages for new and used cars in particular.

Use the demand and supply (D&S) model to demonstrate the change in the market conditions from Q3 2020 to Q3 2021 for the new car market and the used car market in the US.

• Use two separate D&S diagrams corresponding to the two markets, carefully label the curves, and clearly indicate all equilibrium prices and quantities.
  • For your price points, use values based on actual data where possible.
  • Use hypothetical values (rough guesses) relying on intuition for quantities.

What do you think the price elasticity of demand (PED) might look like for new or used cars in Q3 2021 compared to Q2 2020? In your answer, discuss a key determinant of PED.

Answer rating: 100% (QA)

The demand and supply model can be used to demonstrate the change in market conditions from Q3 2020 ... View the full answer