Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

Sport utility vehicles, or SUVs, have been part of the US automotive market since the introduction of the Chevrolet Suburban in 1935. SUVs gained some

Sport utility vehicles, or SUVs, have been part of the US automotive market since the introduction of the Chevrolet Suburban in 1935. SUVs gained some in popularity in the late 1940's, with the introduction of the Jeep and the Land Rover. The market for SUVs exploded in the 1990's. One reason was the "domestication" of the vehicles, as they became more like cars in their performance and comfort. In addition, before 2007 SUVs were not included in the same category with cars for the purpose of calculating manufacturers' overall corporate average fuel economy (CAFE). Today, light trucks and SUVs account for 77% of the US market. With this trend in mind, Ford has announced it will be phasing out all but two cars in its North American portfolio, shifting its emphasis to light trucks and SUVs.

The ascendance of SUVs involves many issues that interest economists, such as: externalities, discounting and forecasting, prisoner's dilemma, availability bias, conspicuous consumption, and peer pressure.

Please address the following questions:

  • From the point of view of buyers, in what ways was it rational to buy an SUV instead of a car?
  • In what ways was it irrational?
  • From the point of view of society, have market forces led to an optimal level of SUV sales?
  • Are there actions the government could take that would lead to a more optimal outcome?

Step by Step Solution

There are 3 Steps involved in it

Step: 1

blur-text-image

Get Instant Access to Expert-Tailored Solutions

See step-by-step solutions with expert insights and AI powered tools for academic success

Step: 2

blur-text-image

Step: 3

blur-text-image

Ace Your Homework with AI

Get the answers you need in no time with our AI-driven, step-by-step assistance

Get Started

Recommended Textbook for

International Economic Relations Since 1945

Authors: Catherine R Schenk

2nd Edition

1351183567, 9781351183567

More Books

Students also viewed these Economics questions