Question
The federal government implemented the Cash for Clunkers program in July 2009 as part of an effort to stimulate the economy, and the U.S. auto
The federal government implemented the Cash for Clunkers program in July 2009 as part of an effort to stimulate the economy, and the U.S. auto sector in particular.Under the program, Americans who traded in an older, "gas guzzling" vehicle for a more efficient new vehicle were eligible for a $3,500 to $4,500 voucher.In total, Congress allocated $3 billion to the program, which resulted in 650,000 new vehicle purchases.Proponents argued that the program would not only be good for the economy, but also good for the environment as consumers bought new, more fuel-efficient cars.
Use the supply and demand models to estimate what impact this program would have on consumer demand for new automobiles.How about used cars?Given this change in demand, what do you predict would be the impact on the market equilibrium price and quantity of automobiles sold in the United States?Display your findings with graphs.
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