Supply and Demand

Timothy Salkil

XECO/212

3/20/2011

Nicholas Kuzmich

Supply and Demand 1

The good that I have experience purchasing is a new car. There is many things that could effect the supply and demand of a new car, and I will explain a few of them that will effect the supply and demand. One thing that does have a major impact on supply and demand is the price of gasoline. This could work one or two ways it could cause more cars to sell that are more fuel efficient, but it's going to be at a higher price. Another thing that could happen is that the demand for the product decreases, because people can't afford to buy a new car so your going to have a decrease in the supply of new cars. Another factor that can affect the good is the economy. The economy plays a major role in supply and demand of new cars, because if people can't afford new cars they are going to fix the cars they have instead of buying new cars. What this is going to cause is an overstock of cars and decrease in the prices of the cars so it could eventually drive the demand back up, because of the decrease in price.

The two substitutes that can be used instead of buying a new car is public transportation and car pooling. If you people can't afford a new car than they have to find other means of transportation and one form is public transportation. Public transportation you can use at a cheaper price, then you would for a new car payment. There are several types of public transportation such as a bus, taxi, trolley etc. Not only are you saving on the car payment, but you are also saving on the price of gas to fuel the vehicle. Car pooling is the other option, and what this does is you cut the price of the car, and fuel so it's easier for your to have easier way of transportation. If you have many people located in the same place and you rotate who drives the car that day, then it's easier to car pool, then to go out and buy a new car that is more fuel efficient. You could also look at it this way as well that it could help you save money to be able to afford a new vehicle which will provide a more of a demand for a new car.

The complements of a new car could be insurance, car stereo, or parking space. For the first Supply and Demand 2 one you have car insurance so you are protected if you happen to be in a car accident, flat tire, or some other type of car trouble. The next would car stereo, and with a car stereo you could listen to any type of music that you wanted to, and you wouldn't have to listen to what the person driving wanted to listen too. The next would be parking space, and say you lived in an apartment, or you work for someone in a big business they might give you your own parking space so having a car you could feel special of having your own place to park. There is several complements that could drive the demand the up or down as well as the supply of the products.

How the necessity of a new car impacts price elasticity, and with having other ways of transportation could drive the price of new cars down so in return that there will be more new cars purchased. It's like a revolving door, and when you have an increase in the number of cars sold, then whats going to happen is it's going to drive the price up so it's going to cause a decrease in the amount of supply needed. Some other factors that might drive the price of new cars up is the accessories that it is provided. Like the car stereo, or the insurance that is involved with it could affect the purchasing of a new car. So what happens here is when the price of a new car goes down, then there is a higher demand for new cars, but when there is increase in price then you see more of a demand for the other types of transportation. So like I stated before it's like a revolving door when price goes up, then people go for the substitutes, and when price goes down, then it become a cheaper value so the demand increases for a new car.