ASSIGNMENT COVER SHEET
SEMESTER 2, 2018
Student Name: Muhammad Rasiullah Ashfaq Ghoora Student ID: 19504355
Tutor’s Name: Sanju NaraidooDay ; Time of Tutorial: Monday 08.30 – 10.30
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Table of Contents
TOC o “1-3” h z u 1.0 Introduction PAGEREF _Toc525930066 h 21.1 Article Summary PAGEREF _Toc525930067 h 21.2 Essay Overview PAGEREF _Toc525930068 h 32.0 Article Analysis PAGEREF _Toc525930069 h 32.1 Demand and Supply PAGEREF _Toc525930070 h 32.2Elasticity and total revenue PAGEREF _Toc525930071 h 72.3 Consumer and Producer Surplus. PAGEREF _Toc525930072 h 83.0 Conclusion PAGEREF _Toc525930073 h 94.0 References List PAGEREF _Toc525930074 h 10
Electric Vehicles: The little industry that could take a bite out of oil demand
1.0 Introduction1.1 Article SummaryIn SMMT News article was published June 2nd 2018, “UK new demand warms in May with modest 3.4% rise (Car registration 2018), there was a grown of new car in UK by 3.4% in May by a units of 192,649 was registered and was launched by the Society of Motor Manufacturers and Traders (SMMT). Moreover, there was a meaningful of -8.5% has been decrease in the previous month May 2017 at the point when demand was affected by the double impacts of VED and the purchaser hesitancy ahead of June 2017 general race. Moreover, there was a decrease in the organization and also in the fleet sector a decrease of -9.6% to -0.7%. Demand for hybrid and plug-in car has increase by 36.1% to 11,240 units representing a record of 5.8% in the market. In The other hand plug-in hybrid car arise by 72.7%, hybrid by 22.6% and battery electric car by 18.7%, however petrol car also take a growth by 23.5% but diesel decrease in 14th month by -23.6%. Moreover, hybrid car substitute can include different type of transportation like for example; riding bicycle, taking the bus and walking might be a surplus for a substitute. (Car Registration SMMT News 2018)
1.2 Essay OverviewThe reason of the essay is to apply the concept of microeconomic, “it consider market behaviour of people and firms so that to comprehend the basic leadership procedure of family units and firms” (Yap 2013). This essay will provide an analysis how there will be a shift in supply and also in demand curve cause a following shift in market equilibrium. The impact on both that is the supply and the demand curve related to hybrid car. Indeed, the relation between elasticity and total revenue will be analysed through hybrid car. According to the article also mention a decrease in the demand in the last year in month of May that affect the buyers and also on VED (Vehicle Excise Duty).
2.0 Article Analysis2.1 Demand and SupplyDemand in terms of economic is where the consumer’s want and willing to buy a good or service. It is the hidden power that drives economic growth and extension. Without demand, no business could ever try to produce anything (Amadeo 2018). A number of factors can affect the demand curve such the price, income, substitutes, consumer taste, price that associate to the product and expectation in the future expectations (Hubbard et al. 2015).
Indeed, under the economic concept underlying the law of demand lead a connection between the quantity demanded and the price but at ceteris paribus not all the price might remain constant, quantity demanded will decrease if the price increase or vice versa (Amadeo 2018).
According to the article, consumers are willing to buy more hybrid car these leads to an increase in demand in hybrid, SMMT (Society of Motors Manufactures and Traders) will produce more hybrid car analyse that consumers can afford to buy a hybrid car. Indeed, Petrol will consider the most important as it a resource to make the car move. Hence, petrol will be a complement good for car. The diagram below illustrates a change in demand from fuel consumption cars to hybrid car this will affect the petrol price.
Diagram 1: A decrease of fuel car.
In the above diagram clear show a supply curve of fuel car and also the demand the cure of fuel curve. Indeed, the equilibrium for car is at the quantity of Q1 and price P1. A rise in fuel price will clear affect the car markets. As we all aware that petrol is a complement good car without it car cannot run. Furthermore an increase in the price of petrol consumer will replace the fuel car. It clear shows that the demand for fuel car will shift to left as well as the demand curve has another equilibrium point which is the quantity decrease from Q1 to Q2 and price from P1 to P2.
Furthermore, an increase in price consumer will replace the car petrol with a perfect substitute. However, due to an increase in petrol there will be an increase also in travelling cost. Hence, consumer will find a perfect way to buy a hybrid car. A change in taste in car will affect the market of hybrid car. Below will demonstrates a diagram an increase in demand for hybrid car.
Diagram 2: An increase in hybrid car
In the above diagram clear show a demand and supply curve of hybrid car. Indeed, there is no effect in the price of petrol, the equilibrium point is from the quantity Q1 and price P1. If an increase in petrol consumer will tend to buy more hybrid car. However, an increase of purchasing hybrid car will shift the demand curve to the right as clear shows in the diagram. Hence, the equilibrium will change with a quantity increase from Q1 to Q2 and price increase from P1 to P2.
Supply is defined as the quantity of a commodity which supplied at any given price over some give period of time (Stanlake 1989). The variables that affect the supply curve are price, input price, technology, expectations and number of sellers (Hubbard et al.2015). According to the article the supply of hybrid car might shift the curve due to a change new technology of hybrid car might reduce the cost of producing of hybrid cars. Below the diagram will illustrate an advance in new technology will shift the supply curve for hybrid car.
Diagram 3: A decrease in the price of hybrid car
In the above diagram clear show a supply curve of hybrid car and also the demand the curve. Indeed, the equilibrium for hybrid car is at the quantity of Q1 and price P1. Due to an increase in technology affect the price of hybrid car and the cost of production will reduce and cause the supply curve has shift to the right as clear show in the diagram. Hence, the equilibrium will change with a quantity decrease from Q1 to Q2 and price decrease from P1 to P2.
Furthermore the relationship between the demand and supply of hybrid is here in the article and these factors that cause shift in the demand and supply curve. Hence, the hybrid car will provide a new equilibrium. The diagram below illustrates the new equilibrium.
Diagram 4: New equilibrium of hybrid car
2.2Elasticity and total revenueElasticity is a measure of responsiveness to a change in another variable (Investopedia 2018). There are several common of elasticities that can be explain common to economic variables which have gain their own special name of time. These include the price of elasticity of supply and demand (Bondarenko 2018).Price elasticity of demand (PED) is a measure of the responsiveness of the quantity demanded to a change in price, measured by dividing the percentage change in quantity demanded of a product by a percentage change in the product price (Hubbard et al 2015). The following formula can be used to calculate PED:
Price elasticity of demanded (PED) = % Change in quantity demanded% Change in priceHowever, in the article does not mention any concern any information of calculating the PED, indeed the producing the amount of hybrid car and also the amount the amount the consumer possess it. Moreover, in the article there is no figure the concern the quantity demanded.
There can be several factors can determine the elasticity of demand one with price of related goods and service. When the price of substitute increase, the customer will want that substitute more of the product or service and less of it substitute (Agarwal 2018). The diagram below will demonstrates the elasticity of hybrid car.
Diagram 5: Elastic of demand – Total revenue decrease when price increases
2.3 Consumer and Producer Surplus.Consumer Surplus refers to the difference between the highest price a consumer is willing to pay and the price the consumer is actually pays. It is specify as the area under the demand curve and above the market price. Whereas, producer surplus is the difference between the lowest prices a firm would have been willing to accept and the price it actually receives. It is specify as the area above the supply curve and under the market price (Hubbard et al. 2015).
Indeed, the increase of buying Hybrid car in the United Kingdom will lead to an increase in the demand of hybrid car. Britain people will in favour for purchasing hybrid car. As a result, this positively affect the consumer and supplier surplus.
Diagram 6: Changes to consumer and producer surplus.
In the above diagram demonstrates the consumer surplus has increased in the area of A and also in area A, B and G. The price of hybrid car has shift both demand and supply curve, it will be also an advantageous to the producer, an increase supplier surplus by the area of C to C, D, E and F.
3.0 ConclusionIn conclude this essay technology has cause an effect in the supply curve of hybrid car to the UK market but an increase in petrol car consumer has shift to buy more hybrid car. Furthermore, the equilibrium shift to the right due to an increase of supplying hybrid car.
Moreover, the change in taste in consumer as they prefer buy hybrid car then petrol car this cause a decrease in the demand curve of petrol car. Indeed, the CO2 can cause a negative side to the environment as in the article clear identify that the fleet renewal has improve air quality but reduce CO2 and it will imply to hybrid and plug-in-technology. (Car Registration SMMT News 2018)
4.0 References ListAmadeo, Kimberly. 2018. “Demand, its Explanation and its Impact”. The balance https://www.thebalance.com/what-is-demand-definition-explanation-effect-3305708Agarwal, Prateek. 2018. “Price Elasticity of Demand”. INTELLIGENT ECONOMIST.
https://www.intelligenteconomist.com/price-elasticity-of-demand/Bondarenko, Peter. 2018. “Elasticity.” ENCYCLOPEDIA BRITANNICA. AccessedSeptember 21.https://www.britannica.com/topic/elasticity-econmics
Car Registration SMMT News. 2018. “UK new car demand warms up in May withmodest 3.4% rise” SMMT News. https://www.smmt.co.uk/2018/06/uk-new-car-demand-warms-up-in-may-with-modest-3-4-rise/
Hubbard, Glenn, Anne Garnet, Phil Lewis and Anthony O’Brien (2015) Introductory Economics (Custom Edition) 3rd edn, Sydney, NSW: Australia
Stanlake, G. F. 1989. Introductory economics. Singapore: Longman
Yap, Bryan. 2013. “Microeconomic Individual Assignment”, Microeconomics (blog), June7, 2013. http://microeconomics0308811.blogspot.com/2013/06/microeconomics-is-branch-of-economics.html