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There has been a strong increase in global demand for semiconductors from around Q3 2020 to Q3 2021, which has led to inventory shortages for new and used cars in particular.
Use the demand and supply (D&S) model to demonstrate the change in the market conditions from Q3 2020 to Q3 2021 for the new car market and used car market in the US.
What do you think the price elasticity of demand (PED) might look like for new or used cars in Q3 2021 compared to Q2 2020? In your answer, discuss a key determinant of PED.
[400 or so words is the suggested amount for Part 2]
[4 marks for diagrams + 6 marks for quality of explanation = 10 marks]
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