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demand supply in regards to the car market
A demand and supply analysis to consider the current conditions of the U.K. car market

Amer Suljic
ID: 13047285

Module code: 4BUS1031
Module leader: David Kraithman

Word count: 1134

University of Hertfordshire

A demand and supply analysis to consider the current conditions of the U.K. car market

With the lack of economic growth in Western Europe, sales in the car market are at their lowest since 2008 (Edwards, 2011). The absence of demand in Europe has caused an oversupply in stock. Firms are now turning attention in to the growing economy in the U.K for salvation. In response demand has been created in several ways, resulting in a 54% sore in car purchases (Harrison, 2013). Price is normally set to deplete surplus stock or simply to hinder sales until resupply. This causes undesirable prices as exceeding supply causing instability. Improved sales forecasting and improving inventory management seems vital to profitability (fleet news, 2013).

One factor which has increased demand is the growth in real income which has influenced the demand for luxury cars as you can see from the graph below. This is because luxury cars are normal elastic goods. One explanation for this rise in demand relates to the average wage increasing by 3.5% cross country thus increasing disposable income for normal goods causing a shift from Q1 to Q3. This rise in average wage has left consumers with more disposable income, lowering the threshold of what was originally considered un-obtainable. This has resulted in increased sales in fuel efficient cars (which are more expensive) (Donnelly, 2013) and due to this demand, supply has increased. This has evoked the supply and demand for inferior good (less fuel efficient cars) from Q1 to Q2. This combined with the sudden influx of credit available in conjunction with declining inflation rates have given consumers’ confidence and more borrowing power in the market which has


Bibliography: Balcombe, R. (2012). Demand for public transport, a practical guide. 1 (1), p18. (link to downloadable journal) http://www.demandforpublictransport.co.uk/TRL593.pdf Barkham, P. (2013). Why Britain can 't stop buying new cars. Available: http://www.theguardian.com/money/2013/oct/08/why-britain-cant-stop-buying-new-cars. Last accessed 20th Nov 2013. Bigelow, P. (2013). Gas Pices Flling Could Mean Less Demand For reen Cars. Available: http://autos.aol.com/article/gas-prices-falling-could-mean-less-demand-for-green-cars/. Last accessed 25th Nov 2013. Condon, J. (2013). Dollar movement props-up high diesel fuel prices. Available: Dollar movement props-up high diesel fuel prices. Last accessed 24th Nov 2013. Donnelly, S. (2013). New Car Sales: Fuel Efficiency Boosts Demand.Available: http://news.sky.com/story/1164674/new-car-sales-fuel-efficiency-boosts-demand. Last accessed 19th Nov 2013. Ewards, T. (2011). Public transport in London: A decade in numbers. Available: http://www.bbc.co.uk/blogs/mindthegap/2011/01/public_transport_in_london_a_d.html. Last accessed 20th Nov 2013. Foy, J (2013). Credit and the car market. Available: http://www.ft.com/cms/s/0/3feb1ce6-2cde-11e3-8281-00144feab7de.html#axzz2lgTQgMZI Fleet News Györffy,K. (2013). United Kingdom Unemployment Rate. Available: http://www.tradingeconomics.com/united-kingdom/unemployment-rate. Last accessed 21st Nov 2013. Heijster, J. (2013). Future of Automotive Manufacturing. 1 (1), p8. (link to downloadable journal) http://www.acemr.eu/uploads/media/Trendstudy_ACEMR_Manufacturing_01.pdf  SMMT. (2010). UK car production slumped in 2009 . Available: http://news.bbc.co.uk/1/hi/business/8474080.stm. Last accessed 23rd Nov 2013. Ofiice of National Statistics . (2012). Annual Survey of Hours and Earnings. Annual Survey of Hours and Earnings. 1 (4 - annual earnings), 1. (link to downloadable journal) http://www.ons.gov.uk/ons/dcp171778_286243.pdf Wilkinson, A Winton, N. (2013). German Auto Makers ' Finances Could Be Wrecked By Energy Policy. Available: http://www.forbes.com/sites/neilwinton/2013/11/25/german-auto-makers-finances-could-be-wrecked-by-energy-policy/. Last accessed 25th Nov 2013. Vaugham, A. (2013). Electric car sales at record high in UK, figures show. Available: http://www.theguardian.com/environment/2013/nov/11/electric-car-sales-record-high-uk. Last accessed 25th Nov 2013
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