--%>

Problem on perfect replacements

Imports and American cars are much close however not perfect replacements. When the U.S. govt. tried to enhance American car sales by setting a price ceiling of P1 on imported cars: (i) The quantity of cars imported will drop/fall from Q0 to Q1. (ii) American car prices would increase to P2. (iii) Foreign car exporters would ship much luxury cars to the United States. (iv) American made car sales would increase by Q2 to Q0.

1763_4.jpg

Can someone help me in getting through this problem.

   Related Questions in Macroeconomics

  • Q : Define Depreciation Depreciation of a

    Depreciation of a currency signifies fall in value of domestic currency in terms of foreign currency. Illustration: When value of rupee in terms of US dollars falls, state from Rs. 45 to Rs. 50 per dollar, it will be a condition of depreciation of Ind

  • Q : Problem on production function Consider

    Consider a model economy with a production function Y = K0.2(EL)0.8, where K is capital stock, L is labor input, and Y is output. The savings rate (s), which is defined as

  • Q : Definition of surplus Definition of

    Definition of surplus: It is a condition in which quantity supplied is more than quantity demanded. To remove the surplus, producers will minimize the price till the market reaches to equilibrium.

  • Q : Full-employment Define the "

    Define the "full-employment" or "natural" rate of unemployment and give its approximate percentage rate as economists currently define it.

  • Q : Explain growth accounting. Economic

    Economic growth is measured by the rate of increase in national output, GDP. The output depends on inputs -labour, capital technology etc. the theories of economic growth bring out how and to what extent each input or factor contributes to the g

  • Q : What is Equilibrium What do you mean by

    What do you mean by the term Equilibrium? Also state its proper definition.

  • Q : Consumption curve Illustrate a point on

    Illustrate a point on consumption curve at which APC = 1. Answer: APC = C/Y = 1 is possible when C = Y, that is, Consumption is

  • Q : Inflation Inflation is frequently

    Inflation is frequently described as "too much money chasing too few goods." Is this a satisfactory definition?

  • Q : Define fiscal policy Define fiscal

    Define fiscal policy? Answer: Fiscal policy is the revenue and expenditure policy of government with a view to combat the state of inflationary or deflationary gap

  • Q : Problem on full employment Does full

    Does full employment take place if AD = AS or S = I?