Problem
Changes in the market for electric vehicles
I. Many cities are working to increase the number of electric charging stations. With more charging stations at grocery stores, airports, and other public locations, electric vehicles (EVs) are becoming a more accessible choice. Draw a graph with supply and demand curves to model the initial U.S. market for EVs before the expansion of charging stations. Which curve(s) move(s) as a result of the increased number of charging stations and what happens to the equilibrium price and quantity of EVs, all else equal? Show the answer graphically and describe it in words.
II. Due to supply chain issues during the pandemic, "lithium prices are rising at their fastest pace in years, fueling worries about a vital ingredient in the rechargeable batteries that power everything from electric vehicles to smartphones" (WSJ, 2021). As compared with the pre-Covid world, which curve(s) move(s) on the market for EVs as a result of the rising price of lithium, and what happens to the equilibrium price and quantity of electric vehicles, all else equal? Show your answer graphically and describe in words. Note: Any shifts due to the expansion of charging stations described under (I) or other effects of Covid should be ignored when answering this question.
III. Assume now that both events described in questions (I) and (II) occur at the same time. What would happen to the equilibrium price and quantity of EVs compared to the initial situation before any of those two events occurred? Note: you do not need to illustrate your answer graphically for full credit but you can do it if it helps you answer.