Question 1

The demand for automobiles is often described as highly cyclical and very sensitive to automobile prices and interest rates. Given these characteristics, describe the effect of each of the following on the quantity demanded or the demand for automobiles. Moreover, when price is expressed as function of quantity, indicate whether the effect of each of the following is an upward or downward movement along a given demand curve or instead involves an outward or inward shift in the relevant demand curve for automobiles. Clearly illustrate and explain your answers

a. A decrease in auto prices

b. A fall in interest rates

c. A rise in interest rates

d. A severe economic recession

e. A robust economic expansion