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Difficulty: HardTypes of Demand

A fall in the price of electric vehicles leads to an increase in the demand for charging stations and a decrease in the demand for petrol vehicles. What types of demand do charging stations and petrol vehicles exhibit relative to electric vehicles?

  1. A
    Competitive demand and joint demand
  2. Joint demand and competitive demandAnswer
  3. C
    Derived demand and composite demand
  4. D
    Composite demand and derived demand

Answer

Joint demand and competitive demand
Charging stations are required to operate electric vehicles, meaning they are consumed together in joint (complementary) demand. Petrol vehicles serve as an alternative mode of personal transport to electric vehicles, meaning they compete for the same consumer market in competitive (substitute) demand.

Step-by-Step Solution

1
Analyze the relationship between electric vehicles and charging stations
Since electric vehicles require charging stations to function, a fall in electric vehicle prices increases the quantity of vehicles demanded, which directly raises the demand for charging stations.
Goods that are consumed together to satisfy a single want exhibit joint (or complementary) demand.
2
Analyze the relationship between electric vehicles and petrol vehicles
As electric vehicles become cheaper and more widely demanded, consumers substitute away from petrol vehicles, causing a decline in the demand for petrol vehicles.
Goods that serve as alternative means of satisfying the same basic want exhibit competitive (or substitute) demand.
3
Combine the respective classifications in the specified order
Charging stations exhibit joint demand, while petrol vehicles exhibit competitive demand relative to electric vehicles.
Matches the requested ordering: charging stations first, followed by petrol vehicles.

Key Concept

Interrelated Demand Types (Joint vs. Competitive Demand)
Estimated Time:1m 30s
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Topics

Types of Demand

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