Shifts in Demand and Supply Curves

Steps:

• Advertising by electric car producers reduces demand for diesel cars, shifting D leftward.
• New tax on diesel cars raises production costs, shifting S leftward.
• Leftward D shift alone would raise price and lower quantity; leftward S shift alone would also raise price and lower quantity.
• Combined shifts result in new equilibrium at higher price and lower quantity than original point X.

Why D is correct:

• D depicts the intersection of shifted-left D and S, aligning with the law of supply and demand where both curves shifting left increase equilibrium price and decrease quantity.

Why the others are wrong:

• A: Shows only demand shift, ignoring tax's supply effect.
• B: Indicates lower price, contradicting both shifts raising price.
• C: Suggests higher quantity, opposite of reduced demand and supply.

Final answer: D