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    Question

    The global demand for electric vehicles (EVs) has been

    steadily increasing due to growing environmental concerns and government incentives. However, the supply of lithium-ion batteries, a crucial component of EVs, has been facing constraints due to limited production capacity and supply chain disruptions. In this scenario, what is the most likely impact on the equilibrium price and quantity of EVs in the short run?
    A Both price and quantity will increase. Correct Answer Incorrect Answer
    B Both price and quantity will decrease. Correct Answer Incorrect Answer
    C Price will increase, and quantity will decrease. Correct Answer Incorrect Answer
    D Price will decrease, and quantity will increase. Correct Answer Incorrect Answer
    E Price will increase, and the impact on quantity is uncertain. Correct Answer Incorrect Answer

    Solution

    The increase in demand for EVs coupled with the limited supply of batteries will create a shortage in the market. This shortage will drive up the price of EVs. However, the impact on quantity is uncertain as it depends on the extent of the supply constraints and the responsiveness of demand to the price increase.

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