You are studying the market for electric passenger cars. To address climate change, the government offers rebates to consumers when they purchase an electric car. At the same time, technological improvements occur, making it cheaper for manufacturers to produce electric cars. What is the effect on the equilibrium price and the equilibrium quantity of electric passenger cars?

The effect on the equilibrium price and quantity of electric passenger cars can be analyzed using the concepts of supply and demand.

1. Government Rebates: When the government offers rebates to consumers for purchasing electric cars, this effectively reduces the price of electric cars for consumers. This increase in affordability increases the demand for electric cars. According to the law of demand, when demand increases and supply remains the same, the equilibrium price will rise and the equilibrium quantity will also increase.

2. Technological Improvements: When technological improvements make it cheaper for manufacturers to produce electric cars, this increases the supply of electric cars. According to the law of supply, when supply increases and demand remains the same, the equilibrium price will fall and the equilibrium quantity will increase.

In this scenario, both the demand and supply are increasing. The increase in demand tends to increase both the equilibrium price and quantity, while the increase in supply tends to decrease the equilibrium price and increase the equilibrium quantity. The net effect on the equilibrium price is therefore uncertain - it will depend on the relative magnitudes of the shifts in supply and demand. However, the equilibrium quantity of electric cars will unambiguously increase.