Microeconomics Help 1 True or False If we observe that fewer

Microeconomics Help!

1) True or False: If we observe that fewer cars are being purchased this year than last year, then we should expect the price of cars to fall? Explain.

Solution

Ans:

False

This means that the quantity is decreased. This will be caused by the decrease in demand and in such case the price must fall or a decrease in supply will cause the price to rise.Hence it is false to expect the price of cars to fall.