Using the Supply and Demand model, draw a graph of the market for automobiles. Be sure to correctly

label both axes and curves and clearly denote your equilibrium values $($P$*$ and Q$*)$ on your graph.

Assume that two $$shocks$$ hit this market: $1)$ due to major supply disruptions, the price of computer chips

used an inputs to the production of cars become very expensive, and $2)$ a number of stimulus payments

get made to households which increases their income.

Illustrate both of these shocks on your graph above. Clearly denoting your new curves with a $1($ex: D$1$

and$/$or S$1).$

Explain the impact of these shocks on the equilibrium price and quantity of automobiles. Is there one

variable $($price or quantity$)$ that you are more confident in predicting the response than the other? If so$,$

why?