Economics For Business Assignment Sample

Comprehensive Guide to Economics For Business Assignment

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Introduction Of Economics For Business Assignment

Concept of Supply and demand theory

Demand is defined as the swiftness at which the buyers desire to purchase a product. The damns depend on two factors, which are the ability to purchase and taste. Taste is the desire for a product and the readiness to purchase that product. Ability to purchase means the consumer should have an adequate amount of assets to purchase that product at a distinct price. Both factors depend upon the market price. Supply is the ability to supply products into the market and this is determined by the actions of the seller. If the inventory is less than the desired inventory then the seller will increase the supply and price of the commodity both. Buyers' and seller reaction is opposite in the situation of price increment. Figure 1 shows the supply and demand curve of a commodity in the market. Is clearly seen that Demand and application work opposite ways in the market. When supply and demand are equal in the market (intersection point of two curves in figure 1), it is equilibrium and the most satisfactory market condition.

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Factors causing a shift in supply and demand

The shift of supply can be caused by several factors including the scarcity of availability of raw materials, fewer inventories than the desired inventory of suppliers and less demand available in the market. The shift of demand can be caused by less availability of assets for the customers to buy the product, an increase of competition in the market or an inflow of products in the market.

Impact of these shifts on the price

Due to the price increment of second-hand cars, this market takes a downfall. 7,530,956 used cars were sold in the UK in 2021, a figure that's 11.5% higher than in 2020 but 5.5% down on the five-year pre-pandemic average (Heycar.co.uk, 2022). Price impacts supply and demand as defined by the supply cost plan and the demand price plan. When the price is increased, demand is low and supply is increased. When the price is low, demand is high and supply is low.

A basic supply and demand equilibrium diagrams

A basic supply and demand equilibrium diagrams

Figure 1: Demand and supply Curves

(Source: Self-developed)

The market will advance to equilibrium if the demanded quantity and supply quantity are equal. It may cause due to some conditions. If the demand is less than the production then the price of the commodity will automatically decrease and also the production will decrease. Eventually, the supply and demand will meet a situation market condition which will lead to the equilibrium. For the second-hand car company, if the demand is less and the supply and availability of a used car are more then the markets will get saturated and in that case, no increase or decrease in price will happen. This is a suitable condition for the buyers of second-hand cars because in saturated market conditions the price of the commodity is generally less.

Supply shifting to the right

Supply shifts to the right

Figure 2: Supply shifts to the right

(Source: Self developed)

Delay in new cars entering the market will provide a sufficient amount of time for the suppliers to cope with the situation and tackle the shortage of semiconductors. By own sourcing parts for the cars and buying or collaborating with new plants for the components required to build cars can ease the scarce supply of new cars in the market and also increase the supply in the market (Heycar.co.uk, 2022).

Supply shift to the left

Before the Covid pandemic, the new car supplier used to buy the semiconductors from third-party suppliers. During that Covid, many of these car-making companies shut down and there is a huge backlog of orders for semiconductors. This situation leads to a long waiting time for new cars. This long waiting time for new cars causes less entering of used cars into the market and insufficiency to meet the demand. This situation causes the increase in prices of used cars in the market and people cannot effort to buy them. Due to the revised tax and subsidy rule in the UK government, the tax on used car purchases becomes higher which causes an increase in price and lower supply.

Demand shifts to the right

The demand for second-hand cars is shifting to the right means they are increasing. Due to the global shortage of semiconductors and the disruption of the supply chain to Brexit in the UK, the production of the new car is inadequate. Also, the price of new cars increased since post-Covid because of the increase in the price of different parts. Hence there is an increasing demand for second-hand cars in the UK (Economicsonline.co.uk, 2022). The increase in demand affects the outflow of inventory stock of the suppliers which in this case will increase and the size of the supplier's desired inventory will also increase.

Demand shifts to the left

The demand shift to the left implies that the demand for second-hand cars decreased to the previous market demand. The income effect can be the primary cause of shifting demand to the left. Due to inflation, lost jobs, the ability of customers to buy the product becomes less and due to the increase in demand for second-hand cars in the market. If the entire demand curve shifts to left without moving down that means the demand for the commodity changes independently of the cost of the product. If the demand is less than the inventory will be less than desired inventory then the price of the commodity will increase and this will lead to a further decrease in demand for the commodity in the market. During the lockdown, the demand for used cars was suppressed and this leads to the increment of prices after Covid. Increasing tax on second-hand cars leads to the increased cost of those cars and the demand becomes low.

Elastic demand

"Elastic demand" stands for one which stands for the modification in the quantity demanded due to a modification in cost considerable. The cost elasticity of the market stands for the balance of the ratio modification in the amount required of development to the ratio modification in cost. Economists utilise it to comprehend how stores and needs vary when an outcome cost varies (Mikayilov, 2020). If a cost difference for development forces a significant modification in each of the two stores or its needs, it stands to contemplate elasticity.

It suggests that there stand adequate replacements for the development. Multiple elements decide the “demand elasticity” for an automobile, including cost classes, the kind of outcome or benefit, revenue classes, and the accessibility of any possible replacements. Heightened-priced outcomes usually stand positively stretchy because, if costs fall, customers stand assumably to purchase at a low cost. This figure reported that a difference in cost affects aconsiderablemodification in the amount required. The outcome with an “elastic demand” stands for customer long-lasting (Çelik, 2019). These stand things that stand bought rarely, like a car, and can stand delayed if cost increases. For sample, automobile repayments include stood extremely thriving in growing automobile deals by lowering prices. Compact reserves for development impact the demand for elasticity. If another outcome can readily stand covered for the outcome, customers will fast swap to the different outcome if the cost of the by-product increases or the cost of the different by-product falls.

Inelastic demand

“Inelastic” stands for a financial period directing to the fixed amount of a suitable benefit when cars cost modifications. “Inelastic demand” suggests that when cars cost moves awake, customers' buying practices remain almost exact, and when automobile cost moves down, customers' buying patterns also stay unmoved. “Inelastic refers” to the fixed amount of a fine or benefit when car cost modifications. This demand suggests that the product cost of a right or benefit moves up, customers' buying practices remain almost exact, but when the cost moves down, clients' buying practices also stay unmoved. If the cost growth held no crash everything on the product amount required, the remedy would stand felt perfectly inelastic. Conditions and cars manage to be fairly inelastic because products that are stand required for survival, like voyages and sports automobiles, grow to be somewhat flexible.

If the cost for an "inelastic" sound stands reduced, the need for that interest accomplishes not grow, resulting in smaller general income expected to the product's more inferior cost and no difference in need. Products would show that the company could not lower the cost of its interests as there stands no profitable result in accomplishing so. On the additional hand, Then the product cost for an "inelastic" acceptable is improved and the order accomplishes not modified, the whole earnings gains required to the more elevated cost and the fixed amount required. Yet, cost gains generally do show a tiny decrease in the amount required.

Elastic supply

A right or usefulness includes an "elastic supply" when the rate modified in the amount provided surpasses the ratio modification in cost. In most possibilities, the donor can react fast to a cost modification.

The Elastic Supply for "perfectly elastic supply" stands endless, where the amount provided is complete at an offered cost, though no amount can stand provided at any additional cost. There stand almost no actual-life models of products, where a little modification in cost would prevent outcome designers from providing a single outcome. A cost elasticity supply more significant than one mechanism reserve is somewhat flexible, where the amount provided modifications by a bigger portion than the cost modification (Galarraga, 2020). A sample would stand for a creation that's effortless to create and spread, like a "fidget spinner". The help to create other spinners is readily known and the full price would stand tiniest to ramp showdown or up. Request for a replacement automobile is considerable potential to be adaptable as the acquisition of a replacement automobile stands conditional on several elements and can stand postponed. The need for a certain prototype of an automobile stands in favour of the positively flexible cause of the existence of multiple alternates. The collection and market turn to announce that the costs of all automobiles will grow, the deals of domestic choice growth, and the deals of important choice fall.

Inelastic supply

The "inelastic supply" stands for that perspective; there stands no difference in the amount provided when the cost varies. Examples have consequences that include unreasonable amounts, like ground or illustrations from departed artists. That represents the ratio modification in excess provided modifications by a more inferior rate than the ratio of cost modification. Inelastic interests have nuclear fuel, which includes a lengthy charge while given the structure, technological know-how, or extended ramp-up strategy for car factories. Asthe collection of automobiles stands to correctly cost "inelastic" at the percentage, an expansion in the market will guide to a ridge in the cost without impacting the abundance (Greene, 2018). Thus, customer payment will increase.

As revenue gains, individuals can pay a more increased % of company revenue on the automobile. Inelastic guides to the fixed amount of a user when it's worth modifications. When the cost of a privilege or benefit modifications and the amount required of that interest accomplishes not greatly vary, the right or benefit is assumed inelastic.

Conclusion

This report concluded the UK's second-hand car market supply chain, and how it works properly. Car market elastic and inelastic supply chain and demand how to up and down in market value. The product demand or supply depends on customer satisfaction and market value. Product buying price depends on product quality. Also, this report concluded that the marker supply policy and this impact on in-car products. If product value increased the supply is decreased as per market value. Recent pandemic situation product sales are decreased enough and after this situation, the UK market is affected very much. Currently, the Uk market demand and supply ratio is average and fulfils customers' demands. The report focused that the demand left and right and quality.

References

  • Çelik, Ö. and Osmano?lu, U.Ö., 2019. Prediction of the prices of second-hand cars. Avrupa Bilim ve Teknoloji Dergisi, (16), pp.77-83. https://dergipark.org.tr/en/pub/ejosat/article/542884
  • Economicsonline.co.uk, 2022 Available at: www.economicsonline.co.uk [Accessed on: 15/11/2022]
  • Galarraga, I., Kallbekken, S. and Silvestri, A., 2020. Consumer purchases of energy-efficient cars: How different labelling schemes could affect consumer response to price changes. Energy Policy, 137, p.111181. https://www.sciencedirect.com/science/article/pii/S0301421519307670
  • Greene, D.L. and Welch, J.G., 2018. Impacts of fuel economy improvements on the distribution of income in the US. Energy policy, 122, pp.528-541. https://www.sciencedirect.com/science/article/pii/S0301421518305135
  • Heycar.co.uk, 2022 Available at: www.heycar.co.uk [Accessed on: 15/11/2022]
  • Mattioli, G., Wadud, Z. and Lucas, K., 2018. Vulnerability to fuel price increases in the UK: A household level analysis. Transportation Research Part A: Policy and Practice, 113, pp.227-242. https://www.sciencedirect.com/science/article/pii/S0965856417304731
  • Mikayilov, J.I., Mukhtarov, S., Dinçer, H., Yüksel, S. and Ayd?n, R., 2020. Elasticity analysis of fossil energy sources for sustainable economies: A case of gasoline consumption in Turkey. Energies, 13(3), p.731. https://www.mdpi.com/635674
  • Whelan, J., Msefer, K. and Chung, C.V., 2001. Economic supply & demand (Vol. 520). MIT
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