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Xeco Supply and Demand

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Supply and Demand
XECO/212
April 22, 2012

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Supply and Demand

The area where I have the most experience in is in the car industry. I am a 35 year old man and I am fortunate that I have had many opportunities to buy cars in my lifetime. I have haggled many prices, enjoyed low interest rates, low payments as well as enjoyed different kinds of cars since I was 18 years old. I have also been on a short end of a deal where I bought a stolen car from a private owner that posted it in a car magazine for sale, long story short, I lost the car and the money I paid for it. So, I believe that I have a lot of experience in this area. Now, the car industry for years was booming before the tragic events of 9-11 and because of these events, prices in gas began to rise dramatically. This is one factor that causes a crucial hit to supply and demand. At one point, the Ford Expedition and Ford Explorer were the top selling automobiles because they were affordable, safe, and over all a nice car. Families could enjoy trips to grandma's house or a theme park with no hassle at all. When gas rises because of a war in the Middle East, we pay for it here at the pump. Gas prices in the United States were around $2. 50 to $3.00 before the events of 9-11. In some places they have soared to $5.00 dollars and have gone as high as $6.00. This effects every hard working person in the United States. Because this effects many people here at home, people may not want to buy bigger cars because of the cost to fill up at the pump. If Expeditions, Explorers and other big trucks do not sell, production and manufacturing slows down and sometimes stops completely on certain car models. For example, Hummer H2 vehicles are not being made anymore because no one is buying. People who once paid $50 dollars at the pump to fill up their gas tanks years ago are paying double or close to triple that now. Supply and demand is effected. Another factor that can cause a change in supply and demand is the economy. These past few years people have lost their homes, cars as well as their jobs and when there is no money coming into
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the household, things slow down. Now, if we consider the gas prices going up and people struggling to make ends meet, brand new cars will have to stay on the lot until things get better. If people are buying cars at a fast pace it would mean that the automotive industry would have to continue making what ever car is selling. But, with unemployment at a high and slowly moving down, jobs being outsourced and an over all economic struggle for all, not only is the supply and demand effected in the car industry but many other industries as well. In regards to substitutes, there are a few things that people can do. To minimize stress and save a bit of money, people can turn in their big trucks and cars that are gas guzzlers for a more economical one. This is one move that I made a few years ago and I have benefited from it. I turned in a Dodge Ram that I absolutely loved for a 4 cylinder car, a Kia Optima. I went from paying $80 bucks to fill up to about $25. This allows me to have more money in my pocket and just a bit more financial freedom. But, because I am just one of the many people doing this, there no wonder why government has been involved with the car industry and has pushed for more fuel efficient cars. So, if economic cars is what is selling, people demanding it, well then companies will supply them. Furthermore, carpooling or taking a buss is another substitute or alternative. Depending where you live or how far from work you may be, a bike is a good option for people to invest in as well. Now a days, car insurance, car payments and registration fees can be costly, especially here in California, so any chance to save money, can benefit everyone. The automotive industry is elastic. I say this because there are many alternatives for people who do not want to buy cars. I explained that bicycles, buses, carpooling and also trains are other options that people have to make it easier on themselves. In my case and I think in most peoples as well, need cars for work because of the distance from home to work. Although car dealers give enticing deals like 0% interest, cash for your old car and cash back, other important elements still play a big part in whether or not people will buy a new car or not. Gas, jobs and job security can take precedence. A change in price effects price elasticity because people have alternatives and also because a drop or rise in price will affect the demand for automobiles.

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