<p>A couple of things:</p>
<ol>
<li>In a competitive market, the supply curve of a good is based on the marginal cost of producing that good, so there will be no shift in the supply curve.</li>
<li>Think about where the demand curve comes from: the aggregated demand schedules of all consumers. A subsidy means that every consumer's individual demand is increased at each price point. Aggregate this up, and it's equivalent to the demand curve shifting right, as you have represented. This means that Qd = Qs at a higher price, and the price increases.</li>
</ol>

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2023-10-05T15:19:02.060Z
so then are my graphs correct in the sense that they answer the question?
jl2005
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2023-10-05T15:27:12.390Z
Also, does the supply curve for Non-EV not change because fewer people demand them therefore they will supply less?
jl2005
CC BY-SA 4.0
2023-10-05T17:44:06.840Z
This causes a change in quantity supplied, which is the point where the demand curve and supply curve intersect determining the price. However, since nothing has changed about the costs of producing non EV's the supply itself curve doesn't shift. Make sure that you're clear on the difference between **supply** (the supply curve) and **quantity supplied** (a particular price point on the supply curve).
A. Miller
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2023-10-05T17:47:23.667Z
For the non-EV figure, in the short run, the demand curve should shift left since the two types of cars are substitutes, and supply should be unchanged.
A. Miller
CC BY-SA 4.0
2023-10-05T18:11:03.103Z
Oh ok so the price only drops since the demand curve shifts left therefor intersecting the supply curve at a lower price point
jl2005
CC BY-SA 4.0
2023-10-06T14:16:29.080Z
That's correct.
A. Miller
CC BY-SA 4.0
2023-10-05T15:09:30.967Z
2023-10-05T15:09:30.967Z
A. Miller
<p>Hello this question came across on my homework. Here's what I know so far. I know the answer is false, but given we need to produce two graphs I am confused on how to represent my knowledge in two graphs. I will attach my graphs to this post. Basically in one EV supply and demand graph which shows that when the government subsidizes them it drives demand up shifting curve right, intersecting the curve at a higher price. My second graph shows that when the EV market prices increase the non-EV markets decrease. My confusion is that if the government subsidizes the price why does it increase?
<a href="https://i.sstatic.net/2rM5V.png" rel="nofollow noreferrer"><img src="https://i.sstatic.net/2rM5V.png" alt="S and D graph for EV" /></a></p>
<p><a href="https://i.sstatic.net/bRpca.png" rel="nofollow noreferrer"><img src="https://i.sstatic.net/bRpca.png" alt="Supply and Demand curve NON-EV" /></a></p>

CC BY-SA 4.0
2023-10-05T14:57:33.313Z
To head confusion the lines in red D1 or S1 are the lines AFTER subsidization and top graph is EVs bottom graph is NON-EVS
jl2005
<microeconomics><supply-and-demand>
If the government subsidizes electric vehicle (EV) purchases , then we can predict a higher price for non-EV vehicles?
jl2005
# If the government subsidizes electric vehicle (EV) purchases , then we can predict a higher price for non-EV vehicles?

(Asked by: username_0 on 2023-10-05)

Hello this question came across on my homework. Here's what I know so far. I know the answer is false, but given we need to produce two graphs I am confused on how to represent my knowledge in two graphs. I will attach my graphs to this post. Basically in one EV supply and demand graph which shows that when the government subsidizes them it drives demand up shifting curve right, intersecting the curve at a higher price. My second graph shows that when the EV market prices increase the non-EV markets decrease. My confusion is that if the government subsidizes the price why does it increase?
[![S and D graph for EV](https://i.sstatic.net/2rM5V.png)](https://i.sstatic.net/2rM5V.png)

[![Supply and Demand curve NON-EV](https://i.sstatic.net/bRpca.png)](https://i.sstatic.net/bRpca.png)

**Tags:** microeconomics, supply-and-demand

> **Comments:**
> **username_0**: To head confusion the lines in red D1 or S1 are the lines AFTER subsidization and top graph is EVs bottom graph is NON-EVS  

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## 1 answers

### Answer by username_1 on 2023-10-05. Score: 1

A couple of things:

1. In a competitive market, the supply curve of a good is based on the marginal cost of producing that good, so there will be no shift in the supply curve.
2. Think about where the demand curve comes from: the aggregated demand schedules of all consumers. A subsidy means that every consumer's individual demand is increased at each price point. Aggregate this up, and it's equivalent to the demand curve shifting right, as you have represented. This means that Qd = Qs at a higher price, and the price increases.

> **Comments:**
> **username_0**: so then are my graphs correct in the sense that they answer the question?  
> **username_0**: Also, does the supply curve for Non-EV not change because fewer people demand them therefore they will supply less?  
> **username_1**: This causes a change in quantity supplied, which is the point where the demand curve and supply curve intersect determining the price. However, since nothing has changed about the costs of producing non EV's the supply itself curve doesn't shift. Make sure that you're clear on the difference between **supply** (the supply curve) and **quantity supplied** (a particular price point on the supply curve).  
> **username_1**: For the non-EV figure, in the short run, the demand curve should shift left since the two types of cars are substitutes, and supply should be unchanged.  
> **username_0**: Oh ok so the price only drops since the demand curve shifts left therefor intersecting the supply curve at a lower price point  
> **username_1**: That's correct.  

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