New cars are supplied by auto manufacturers via a network of legally separate but captive retail dealerships. Whether the increased demand for high-fuel e ciency cars and decreased demand for low fuel-e ciency cars will show up primarily in the prices or in the market shares of new cars depends on the elasticity of the combined response in this supply chain. There are several reasons to think that supply may not be perfectly inelastic, and that therefore at least part of the response will show up in quantities. First, automobile manufacturers and dealers both have the ability to absorb increases in inventory. While holding inventory of something as large.
