Automotive Industry Supply and Demand Katharyn E. Moore Supply and Demand The automobile industry has certainly have seen fluctuations in supply and demand, especially in the last decade. The economic turmoil of the United States has only been one factor in supply and demand of vehicles. This is evident with employment and income of consumers, interest rates, gas prices and the consumers need for more efficient cars. The demand for more fuel-efficient transportation increases as gas prices rise and the supply for fuel-efficient cars also rises.
Manufacturers will increase the supply of fuel-efficient cars to meet the demand. If the prices of these cars are more than what the consumer is willing to pay, the demand will decrease and inventory of these cars will increase. A decrease in price of the fuel-efficient care will cause the demand to increase and the manufacturer to increase supply at the price the consumer is willing to pay. Equilibrium is the supply and demand of fuel-efficient cars will meet at a price that the consumer is willing to pay and the price the manufacture will charge for the car (Colander, 2011).
The resources needed for the industry whether it is employees, raw materials, financial and technology affect supply and demand in the automotive industry. These resources are needed to facilitate the making of vehicles and their supply either abundant or scarce will affect the industry. The unavailability of steel in manufacturing of fabricated metal product decreases the ability to supply the framework for a vehicle will decrease (Gross output by Industry, 2010). The manufacturer will have to decrease the supply.
The limited availability will increase prices of metal and decreases demand for the product at a higher price. If the demand for cars is high, the manufacturer will have to pay the higher cost and forward that increase on to the consumer increasing the price of the car. The consumer may not want the higher cost car and demand for the car will decrease a factor in moving the supply and demand curves of cars. Alternatives in the automobile industry are ongoing as manufacturers are introducing more fuel-efficient cars as well as biofuel (e85) and electric cars.
New technology and consumer preference of these alternatives will affect the supply and demand of vehicles. Consumer preference to a more ecological friendly vehicle increases demand and encourages supply increases from the manufacturer. Consumers have the opportunity to help the environment and decrease the usage for gas when renting a vehicle. Enterprise has added electric cars to their rental fleet along with hybrids and fuel-efficient vehicles (Finance News, 2011).
The shift in demand for these vehicles will change the demand curve of alternative vehicles. Consumers are the important factor in supply and demand in the automobile industry. Our decisions of a fuel-efficient vehicle and the price we are willing to pay for these vehicles influence the supply and demand. We have choices as consumers, and these choices influence competition, pricing, and demand of vehicles available for purchase. The supplier will act accordingly to these demands and make available the supply of product the consumer wants.
The demand for vehicles is dependent on pricing, new technology, fuel efficiency, alternative fuels and competition (Colander, 2011). These decisions will increase or decrease the supply and demand curves with these choices. With all of these and other factors the supply and demand curve will increase and decrease as the market changes with these influences. Supply and demand will always be changing as we choose to purchase products and services that we need for our psychological and physiological needs. References Colander (2011). Introduction into Macroeconomics.
Macroeconomics (7th Ed. ), Chapter Four, United States: McGraw-Hill-Create. Finance News. (2011, October 27). Enterprise Rent-a-Car expands electric vehicle fleet. Retrieved October 30, 2011, from Yahoo. com website: http://finance. yahoo. com Gross output by Industry. (2010, December 14). Retrieved October 28, 2011, from Bureau of Economic Analysis website: http://www. bea. gov U. S. International Trade in goods and services. (2011, October 13). Retrieved October 28, 2011, from U. S. Census Bureau – Economic Analysis News website: http://www. bea. gov