economics Essay

380 WordsMay 24, 20092 Pages
Look at the Motor Trade business. If you want to buy a top marque motor i.e., Bentley, you would most likely have to wait for delivery and there would be no {special offers} to encourage buyers. When the trade buoyant the other makers do not have to offer incentives to the punters. However when demand is low you will get extended warranties, lower interest charges and a whole raft of extra incentives to "come and buy”. So in other words when the demand for the car is high the prices go up and when demand is down prices will reduce, or competing car companies could suddenly lower there prices to get more customers. I have chosen the Motor Trade business because there are so many different competing car companies and so much information to look at and choose from I decided it would be a great and easy choice to look in to. I also chose this particular business because I have a vast interest in cars, in particular cars that are new but still have that old fashioned look about them, such as Bentley or Rolls Royce. Having this taste for cars made this type of business more exiting and enjoyable for me to research. It is a well known fact, that various prices of goods fluctuate at various levels. The products which fluctuate most in price are often held to be necessities, but what is that makes these changes, and which factors influence them. It seems sensible to ask which group these products belong. Necessities are known to be inelastic, but so are a lot of products with no close substitutes like for example motor cars, petrol, tobacco and alcoholic drinks. Now what do these goods have in common, one might ask. Well, for starters they all have a very inelastic demand. In these situations we get the graph as the one below (1.A). From 1.A it is obvious that if quantity by some reason decreases from Q1 to Q2 this gives a quite high increase in price from P1 to P2.

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