Application Exercise 3g: Market for petrol-powered cars
Motor vehicle manufacturers are forced to pay higher prices for robotics used on the assembly line | The supply curve will shift to the left because the costs of production for manufacturers rises | This creates a shortage in markets (i.e. excess demand) at the original price | Producers will eventually raise the price until the shortage is eliminated |
Consumer preferences switch away from petrol-powered cars and towards less polluting forms of transport | The demand curve shifts to the left (i.e. demand decreases) because consumers are preferring substitutes | This creates a surplus in markets (i.e. excess supply) at the original price | Producers will eventually reduce the price until the surplus is eliminated |
There are significant improvements in battery technology that enables electric cars to run without recharge for longer periods of time | The demand curve shifts to the left (i.e. demand decreases) because a substitute product becomes more attractive | This creates a surplus in markets (i.e. excess supply) at the original price | Producers will eventually reduce the price until the surplus is eliminated |
The price of a ticket on public transport falls to very low levels | The demand curve shifts to the left (i.e. demand decreases) because the price of a substitute falls | This creates a shortage in markets (i.e. excess demand) at the original price | Producers will eventually raise the price until the shortage is eliminated |
The price of petrol increases from $1.10 to $5.00 per litre
| The demand curve shifts to the left (i.e. demand decreases) because the price of a complement increases | This creates a shortage in markets (i.e. excess demand) at the original price | Producers will eventually raise the price until the shortage is eliminated |
The cost of materials, such as plastics and steel, increase to high levels
| The supply curve will shift to the left because the costs of production for manufacturers rises | This creates a shortage in markets (i.e. excess demand) at the original price | Producers will eventually raise the price until the shortage is eliminated |
Consumer confidence falls to low levels
| The demand curve shifts to the left (i.e. demand decreases) because consumers will tend to spend less on most goods and services | This creates a surplus in markets (i.e. excess supply) at the original price | Producers will eventually reduce the price until the surplus is eliminated |
The price of electric cars fall significantly
| The demand curve shifts to the left (i.e. demand decreases) because the price of a substitute falls | This creates a surplus in markets (i.e. excess supply) at the original price | Producers will eventually reduce the price until the surplus is eliminated |
Australia enters a period of climatic change where the number of wet days falls by 90% | The demand curve shifts to the left (i.e. demand decreases) because substitute forms of transport (e.g. motorbikes, bicycles, public transport) become relatively more attractive | This creates a surplus in markets (i.e. excess supply) at the original price | Producers will eventually reduce the price until the surplus is eliminated |
Government regulations change to prevent young people getting a driving licence until they are 21 | The demand curve shifts to the left (i.e. demand decreases) because consumers are forced to seek alternative transport options (e.g. public transport, bicycles). | This creates a surplus in markets (i.e. excess supply) at the original price | Producers will eventually reduce the price until the surplus is eliminated |
The costs of labour increase for manufacturers
| The supply curve will shift to the left because the costs of production for manufacturers rises | This creates a shortage in markets (i.e. excess demand) at the original price | Producers will eventually raise the price until the shortage is eliminated |
Interest rates increase to very high levels, impacting on the discretionary income of households | The demand curve shifts to the left (i.e. demand decreases) because consumers have less money to spend on most goods and services given that they are required to use more of their income to service loans, such as mortgages. In | This creates a surplus in markets (i.e. excess supply) at the original price | Producers will eventually reduce the price until the surplus is eliminated |
The government reduces income taxes to low levels
| The demand curve shifts to the right (i.e. demand increases) because consumers will have more disposable income to spend on all goods and services | This creates a shortage in markets (i.e. excess demand) at the original price | Producers will eventually raise the price until the shortage is eliminated |
Productivity at the manufacturing plants increases due to advances in technology at car manufacturing plants | The supply curve will shift to the right because the per unit costs of production for manufacturers will fall | This creates a surplus in markets (i.e. excess supply) at the original price | Producers will eventually reduce the price until the surplus is eliminated |
State governments reduce payroll taxes
| The supply curve will shift to the right because the costs of production for manufacturers will fall as their tax bill decreases | This creates a surplus in markets (i.e. excess supply) at the original price | Producers will eventually reduce the price until the surplus is eliminated |
Increases in the costs of complying with government laws and regulations
| The supply curve will shift to the left because the effective costs of production for manufacturers rises | This creates a shortage in markets (i.e. excess demand) at the original price | Producers will eventually raise the price until the shortage is eliminated |
The federal government reduces subsidy support to motor vehicle manufacturers | The supply curve will shift to the left because the effective costs of production for manufacturers rises | This creates a shortage in markets (i.e. excess demand) at the original price | Producers will eventually raise the price until the shortage is eliminated |
There is global shortage of computer chips that are used in most new cars | Supply curve shifts to the left as the production of new cars must fall | This creates a shortage in markets (i.e. excess demand) at the original price | Producers will eventually raise the price until the shortage is eliminated |
The council allows electric scooters to be used on roads and footpaths | The demand curve shifts to the left (i.e. demand decreases) because a substitute product becomes more attractive | This creates a shortage in markets (i.e. excess demand) at the original price | Producers will eventually raise the price until the shortage is eliminated |
The price of ebikes falls by 40% | The demand curve shifts to the left (i.e. demand decreases) because the price of a substitute falls | This creates a surplus in markets (i.e. excess supply) at the original price | Producers will eventually reduce the price until the surplus is eliminated |