Question 2

What happens to the equilibrium price and quantity of hybrid cars (these run partly on electricity and are very fuel efficient), when the following changes happen simultaneously:

a. gasoline prices rise considerably

b. the technology to make hybrid cars advances considerably, making it cheaper to produce these cars.

A) The equilibrium price increases, and the change in the equilibrium quantity is indeterminate.

B) The equilibrium price decreases, and the change in the equilibrium quantity is indeterminate.

C) The change in the equilibrium price is indeterminate, and the equilibrium quantity increases.

D) The equilibrium price increases, and the equilibrium quantity decreases.

E) The equilibrium price decreases, and the equilibrium quantity decreases.