Question

Which scenario best reflects the relationship between production and demand in a recession? Car dealerships have minimal overstock. Car dealerships are not restocking. Car dealerships cannot sell their stock. Car dealerships cannot obtain stock. (econs)

Answer 1

In a recession people don't have money and can't purchase cars so dealerships cannot sell their stock.

Answer 2

During a recession individual consumers do not have available cash to spend on any things other than essentials.  For a few, these essentials may include a vehicle but it becomes much less likely than in a period of non-recession.  People will also be looking for the best possible bargain or to negotiate a deal, so that their money is optomised.  Based on this model, when considering the role of the car dealership you could say that "car dealerships cannot sell their stock."  Whilst it is also likely that car dealerships would also have minimal overstock and not be restocking at the same rate, it is not the principal relationship between production and demand that is illustrated by these statements.  It is important to remember that it is also not true that car dealerships cannot obtain stock as car production would continue in other parts of the world as it is an international and not a national trade, it may however be more challenging for the dealerships to make the profit need to obtain the same amount of stock as when they are outside of a recession.