Very Big US Auto - Very Big US Auto is one of the oldest and one of the largest auto manufacturers of autos in the US.Very Big US Auto's supply chain is highly dependent components manufactured in China and assembled in the US.The Chinese has rebounded quickly, much of the production capacity is still going to rebuild inventories so the supply of components still lag behind demand.Additionally manufacturing facilities like ours must take extra precaution to keep workers safe.Costs are rising on all aspects of production across the industry.Given these supply side factor, we know that the supply of auto is relatively inelastic.On the demand side, Very Big US Auto knows that demand is relatively elastic with a price elasticity of demand of 1.2. But we also know that pandemic has made some transportation substitutes less acceptable.

at the situation of Very Big US Auto.They are facing a highly elastic demand curve for new autos.Who is bearing the burden of the cost of the tariff? What happens to the auto makers profit margin?