A few years ago, Volkswagen (VW) was found to have cheated on U.S. emission tests. The group was found to have falsified U.S. pollution tests on 500,000 diesel engine vehicles by installing software ("defeat devices") to make them appear cleaner than they were. As soon as the cars were on the road, they would emit as much as 40 times the amount of nitrogen oxides permitted. The affected vehicles include the VW Jetta, Beetle, and Golf from 2009 through 2015. In addition, the Passat from 2014-2015 and the Audi A3 between 2009-2015. About five million VW-branded cars, including Tiguan models, and 1.8 million light commercial vehicles were affected worldwide. Other group brands such as Audi (2.1 million cars), Skoda (1.2 million cars), and Seat (700,000 vehicles) were also involved.

• Take into account the market for VW cars as a whole (that is, the market for VW cars as a whole, and assuming no differences between individual models). Has this scandal affected demand in any way? If so, how?
• If the polluting technology is more affordable to produce, would it affect supply once the cheating is revealed?
• In the wake of the scandal, VW was fined and required to recall many vehicles. Would you say these costs influenced VW's decision to produce a certain number of cars? Describe the reasons for assuming a constant price.
• How do you think this scandal affected the market for American-made automobiles? What do you think happened to supply and demand?