EV Buyers in the U.S. Get Tax Credit Until September 30

Answer the following questions to check your understanding of the story.

Given that dealers have ample inventories of unsold new EVs, what is the likely elasticity of supply?

a) Perfectly inelastic

b) Unit elastic

c) Perfectly elastic

d) Between unit and perfectly inelastic

Wrong! - Will the quantity dealers sell be fixed regardless of the quantity demanded? Will the percentage change in the quantity suppled be equal to or smaller than the percentage change in price?

That's Right! - A If dealers sell the quantity demanded at the advertised price, supply is perfectly elastic.

If the supply of new EVs is perfectly elastic, how will the tax credit change the price of EVs?

The tax credit will ____________ the price by ____________.

a) raise; less than the full amount of the credit

b) lower; the full amount of the credit

c) raise; the full amount of the credit

d) lower; more than the full amount of the credit

Wrong! - Does a tax credit raise or lower the price? Does the price change by more than the full amount of the credit?

Correct! - The tax credit will lower the price by the full amount of the credit because dealers are willing to sell the quantity demanded at the advertised price.

How will the tax credit change the quantity of new EVs traded in September and October?

The tax credit will ___________ the price and ___________ the quantity of EVs traded in September and ___________ the quantity of EV’s traded in October.

a) raise; decrease; increase

b) lower; increase; decrease

c) raise; increase; increase

d) raise; decrease; decrease

Wrong! - How does the tax credit change the quantity of EV’s traded in September, and how does the quantity traded in September influence the quantity traded in October?

Well Done! - A The tax credit will lower the September price, which will increase the quantity of EVs traded in September, some of which would have been sold in October, so the October quantity will decrease.

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