Think about two products, “safe cars” (a heavy car such as a BMW 530xi with infrared night vision, four-wheel antilock brakes, and electronic stability control) and “dangerous cars” (a lightweight car such as _____ [name removed for legal reasons, but you can fill in as you wish]).
a. Are these two products substitutes or complements?
b. If new research makes it easier to produce safe cars, what happens to the supply of safe cars? What will happen to the equilibrium price of safe cars?
c. Now that the price of safe cars has changed, how does this impact the demand for dangerous cars?
d. Now let’s tie all these links into one simple sentence:
“In a free market, as engineers and scientists discover new ways to makes cars safer, the number of dangerous cars sold will tend to _______________.”