SITUATION

How might the decreasing price of gasoline impact 1) the supply of large (luxurious though relatively inefficient) vehicles,2) the consumer demand for them, 3) the supply of fuel-efficient no-frills transportation (like the Smart Twofor which gets 49 miles per gallon), and 4) the demand for basic fuel-efficient vehicles?The graphical analysis must use two market grids (supplied below).Each will have its own demand and supply curve.Let the left grid represent the market for large luxury vehicles.Let the right grid represent the market for basic fuel-efficient vehicles.In the written analysis (part b) be sure to comment on which prices (for certain) should increase or decrease and which might be indeterminate. Similarly, which quantities should (for certain) increase or decrease and which might be indeterminate.

a)GRAPHICALANALYSIS (one graph for LUXURIOUS VECHCLES (1 & 2 above) and another graph forBASIC VEHICLES (3 & 4 above)

b)WRITTEN