Ch. 4 Pushing Tin In July, 2009, the government implemented a cash for clunkers\
ID: 1157654 • Letter: C
Question
Ch. 4 Pushing Tin In July, 2009, the government implemented a cash for clunkers" (CARS) program http:/www.cars govfiles/official information/July27PR pdf. or http //www.usatoday com/money/autos/2009-05-11-chrysler-gm-cash-clunkers_n.htm The stated goal of the program was to subsidize the purchase of fuel efficient cars if they also turned in (for destruction) an older, less efficient car. This was introduced at a time when the recession had hit auto makers especially hard, and most automakers had an excess inventory of last year's models in their inventory, and unemployment was at 9 5% and rising (about John Bergstrom's idea for the $5000 credit for buying new cars. http//blogs wsj com/autoshow/2009/02/03/dealer-suggests 5000-government-vouchers-to-boost-sales/) gnore for a moment the environmental aspect of this program, and consider the impact on supply and demand for new cars What did this proram do to the supply and demand curves for new cars in both the short run, and longer run? What did it do to the demand curve for autoworkers?Explanation / Answer
Ans
It shifted rightwards demand for cars in shortrun but not in longrun as in longrun this program was not to be there. This inturn increased quantity supplied in shortrun but not in long run. AS A RESULT derived demand for auto workers increased in shortrun.