Learning Path
Question & Answer1
Understand Question2
Review Options3
Learn Explanation4
Explore TopicChoose the Best Answer
A
demand
B
relative prices
C
supply
D
production costs
Understanding the Answer
Let's break down why this is correct
Answer
When inflation rises significantly, like a 25% increase in electric vehicle prices, it primarily affects the cost of goods. This means that the prices of these vehicles become much higher for everyone, including international buyers. As a result, foreign buyers may choose not to purchase these electric vehicles because they can find cheaper alternatives elsewhere. This decrease in demand from other countries can lead to fewer exports, which can hurt the economy of the country that produces these vehicles. For example, if a country known for electric cars raises its prices, other countries might turn to manufacturers in places where vehicles are still affordable, leading to a drop in exports.
Detailed Explanation
Relative prices show how much one good costs compared to another. Other options are incorrect because Some might think demand changes when prices rise; Supply refers to how much of a product is available.
Key Concepts
Inflation and its effect on trade
Relative pricing in international markets
Export levels
Topic
Inflation and Trade Effects
Difficulty
medium level question
Cognitive Level
understand
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