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Leave a small comment to students post. (70-100 words, each)
Student one: AH
1. One cause of shift in supply is production costs. Keeping production costs low will allow for a company to create a larger supply of goods much quicker. When production costs increase, it puts a strain on the company. It makes it more difficult for companies to produce more products because they may have to lay off employees or raise the price on their product in order to keep production in motion. A second cause of shift in supply is technology. With technology growing in today’s day and age, newer technology may allow a company to produce products at a faster rate. It may lower production costs as well because the technology could reduce or eliminate human workers. Eliminating human workers would reduce the amount of jobs available, but reduce the production costs which would lower the price of the product as well. Overall, it would create a larger profit for the production company. A third cause of shift in supply is government policies. The government implies taxes on many products. Taxes can take a huge hit on companies. When products are more expensive, the taxes also increase. This increase affects the company because the consumer may not be looking to pay a higher price all because the company has to pay a higher price in taxes to produce the product.
One cause of shift in demand is price. If the price of a product increases, the demand for the product will decrease. A consumer may find an alternative product at a lower cost. A consumer may also wait for a drop in price for the product they want, or for the release of a newer version so they can purchase the older version at a more ideal price. A second cause of shift in demand is income. Income plays a large role in demand. Those who have a larger income are more likely to purchase a product regardless of the price. Those who are on a tighter budget are less likely to have extra spending money that is outside of their budget range. A third cause of shift in demand is preference. Consumers demand products that relate to their interests. Creating products that consumers are going to grab interest in will create a high demand for the product. If a product does not interest consumers of any gender or age range, the demand will diminish causing a company to be left with an oversupply of the product.
2. The automotive industry is influenced by the above causes of shifts in supply and demand. For example, income is an important focus when creating a vehicle. In order to have a high demand for a vehicle, the vehicle needs to be in the price range of the average income. This will create for a high demand, supply, and revenue of the vehicle. A majority of car buyers are in the average income range, and are looking for a reasonably priced vehicle that has high safety ratings and a numerous amount of features available. Another impact on the automotive industry is production costs. Keeping production costs low means having high end technology to produce cars quickly to keep up with the demand. Having new technology such as robots to build these cars will eliminate having to pay high wages or overtime for employees. It will allow for companies to keep their employee pay costs low by only having to have a small number of employees working for them controlling the robots. Doing business with other countries, or having production factories in other countries can keep costs low as well. Other countries have lower incomes which could also be a positive in production.
Student two: BW
A specific example of a supply and demand shift would be the electricity price crisis in California caused by Enron and other power companies. They created their own supply restrictions at the same time demand rose due to the weather conditions that were going on at the time, causing both a left shift in supply and a right shift in demand. This caused the price of electricity to go up in value 25x more than its value before the entire ordeal began. As a result of this there are now new restrictions in place by the government to make sure this kind of incident cannot happen again. This means that electricity sales are now more closely monitored and new restrictions and guidelines are in place that power plants and sales need to follow in that market.
Student three : DE
Please describe and define three causes of shifts in supply and three causes of shifts in demand.
(Demand) Change in consumer expectation: When consumers feel that they are not getting what they want from a product, its demand will decline for a more favorable product that suits their needs or is more current.
(Demand) Change in income: When buyers have more or less disposable income, demand for certain products will decline, and some will increase. When income rises, the demand for inferior goods will decline.
(Demand) Change in buyer taste: When the iPhone was released and began to thrive, sales of the Blackberry began to decline. Touchscreens soon took place of buttons on phones and the demand of phones with buttons decreased.
(Supply) Change in resources: The raw resources used to make a product are in low supply.
(Supply) Change in Technology: The product has become obsolete.
(Supply) Change in number of suppliers: The amount of suppliers producing a product has declined or increased.
2. Give a specific industry example and how this impacts their business today.
The automotive industry has faced all of these challenges at a point in its brief history. A change in resources occured in world war two when the metal and land being used to produce cars was being used to produce tanks and airplanes. A change in the number of suppliers in constantly changing as new suppliers emerge (Tesla) and others go out of business (Pontiac). A change in technology is a constant struggle in the auto industry. The most recent example would be the shift in popularity towards electric vehicles and alternative energy. Changes in income effect car demand. When gas prices increased in the 70’s The demand for foreign economy cars increased. Changes in buyer taste can make or break auto manufacturers. Fiat/Chrysler has issues with staying ahead of the buyer curve and releasing cars with technology other manufacturers have had in their cars for years. Changes in consumer expectations in regards to quality plagues the auto industry. When the quality of a product isnt consistent or has many issues with recalls, consumers become weary of buying a product that is deemed unreliable and demand declines.