Draw a graph to illustrate the effect of higher gasoline prices ...

[cabate]

Draw a graph to illustrate the effect of higher gasoline prices on the demand for large SUVs. What is the relationship between gasoline and SUVs?
 
  What will be an ideal response?

Question 2

Suppose that you lend 1,000 to a friend and he or she pays you back one year later. What is the opportunity cost of lending the money?
 
  A) the nominal interest rate that would have been earned on the money
  B) There is no cost.
  C) the implicit cost of the money
  D) the real interest rate that would have been earned on the money

[tashiedavis420]

Answer to Question 1

Gasoline and SUVs are complements. When the price of gasoline rises it becomes more expensive to drive an SUV, and so the demand for SUVs is likely to decrease (people may switch to smaller, more fuel-efficient vehicles). Note that as a result of the decrease in demand for SUVs their price should decrease and so should the quantity of SUVs sold.

Answer to Question 2

D

[cabate]

Correct answers!

[tashiedavis420]

Great! Please up vote