BU.220.620 Fall 1 2017
Economics for Decision
Magdalena Barreiro, Ph.d
Do you think the price elasticity of demand for Ford sport-utility vehicles (SUVs) will increase, decrease, or
remain the same when each of the following events occurs? Explain your answer.
Other car manufacturers, such as General Motors, decide to make and sell SUVs.
SUVs produced in foreign countries are banned from the American market.
Due to ad campaigns, Americans believe that SUVs are much safer than ordinary passenger cars.
The time period over which you measure the elasticity lengthens. During that longer time, new models
such as four-wheel-drive cargo vans appear.
a. The price-elasticity of demand for Ford SUVs will increase because more substitutes are available.
b. The price elasticity of demand for Ford SUVs will decrease because fewer substitutes are available.
c. The price elasticity of demand for Ford SUVs will decrease because other cars are viewed as less of a substitute.
d. The price elasticity of demand for Ford SUVs will increase over time because more substitutes (such as four-