Question 1 Ceteris paribus, assume an increase in the demand for electric cars has resulted in better living standards due to cleaner air. This has resulted in the government providing a 50 percent subsidy for all electric car manufacturers. Using demand and supply graphs illustrate and explain the impact on the equilibrium price and quantity in the market for electric cars? HINT: There is more than one possible outcome. Since government supplies a 50% subsidy for all electric car manufactures, the manufacture will Improve. The production of the electric car will increase, due to the subsidies. Due to the Increase in the supply of the electric cars, the pollution will reduce and will have a better living standard due to clean air. Because of the supply of electric cars, there will be an Increasing of the environment conditions. Supply of electric car Improvement of environment condition Price 52 Price 57 51 P2 P2 D P1 P1 D1 D1 Quantity demanded Q2 Q1 Quantity demanded Price 57 P2 P1 D1 01 02 quantity demanded