WAEC Economics 2011 Theory — Question 15

Model answer

Car and petrol are complementary goods. A decrease in import duty on cars will lead to an increase in supply of cars (S0 to S1) as a result of a decrease in import duties, and increase in quantity of car demanded from q0 to q1. This leads to increase in demand for petrol from D0 to D1. The price of petrol increases from P0 to P1 and the quantity from q0 to q1.