Shifts in Demand and Supply Curves for Cars

Steps:

• Assume D2 represents a rightward demand shift (increased demand) and S2 a rightward supply shift (increased supply), based on standard economic graphs.
• Examine each option for factors affecting car demand (e.g., substitutes, income) and supply (e.g., production costs, number of producers).
• Increase in train prices raises substitute costs, boosting car demand; more producers expand market supply.
• Confirm only option C causes both rightward shifts.

Why C is correct:

• Per the law of demand, higher prices for substitutes (train travel) increase demand for cars; law of supply states more producers lower costs and increase supply output.

Why the others are wrong:

• A: Both factors (lower incomes, higher costs) shift curves leftward.
• B: Petrol scarcity decreases demand (complement), while subsidy increases supply—mixed shifts.
• D: Fewer loans and taxes both decrease demand and supply, shifting leftward.

Final answer: C