Week 1 Discussion: Supply And Demand Drivers

Week 1 Discussion Supply And Demand Drivers

Select a good or service to analyze (not a text example) and answer the following questions: 1. What are the drivers of demand (describe their impact on the demand curve)? 2. What are the drivers of supply (describe their impact on the supply curve)? 3. Is the market price for this good or service determined by the invisible hand of the market? If not, how is it determined and why? 4. Has the demand curve for this good or service shifted to the left or right in the last few years? Why? 5. Has the supply curve for this good or service shifted to the left or right in the last few years? Why? Your posts must be substantive and must comment on, question, or challenge your classmates' thoughts. Reference: Use any reference you like, but cite per APA 6th edition. Text: The Macro Economy Today Author: Schiller, B. Publisher: McGraw-Hill Ed/Year: 13th/2013 ISBN:

Paper For Above instruction

The dynamics of supply and demand are fundamental to understanding market economies. For this discussion, I will analyze the market for electric vehicles (EVs), a rapidly growing segment within the automotive industry. This choice is relevant due to recent technological advancements, policy shifts, and changing consumer preferences that have significantly influenced this market over the past few years.

Drivers of Demand for Electric Vehicles

The demand for electric vehicles is primarily driven by environmental concerns, technological innovations, government policies, and consumer preferences. Environmental consciousness has become a significant factor, as consumers seek sustainable transportation options to reduce their carbon footprint. As awareness of climate change increases, so does the demand for cleaner alternatives to traditional internal combustion engine vehicles (Huang et al., 2021). Technology improvements, such as longer-lasting batteries and reduced charging times, have also made EVs more appealing, effectively shifting the demand curve outward. Government incentives, including tax credits, subsidies, and stricter regulations on emissions, further bolster demand by making EV ownership more financially attractive (Turrentine & Kurani, 2007). Additionally, societal shifts towards eco-friendly lifestyles influence consumer choices, contributing to a rightward shift in the demand curve for EVs.

Drivers of Supply for Electric Vehicles

The supply of electric vehicles is affected by technological advancements, production costs, infrastructure development, and regulatory environments. Innovations in battery technology and manufacturing processes have decreased production costs, enabling automakers to supply vehicles at more competitive prices (Egbue & Long, 2012). Investment in charging station infrastructure reduces range anxiety, encouraging manufacturers to increase supply to meet growing consumer demand. Regulatory standards requiring automakers to produce a certain percentage of zero-emission vehicles incentivize increased supply. Supply chain improvements and partnerships with technology firms also enhance the ability of manufacturers to meet fluctuating demand more efficiently. Overall, these factors have shifted the supply curve to the right in recent years, making EVs more accessible and affordable.

The Market Price and the Invisible Hand

In theory, the market price of electric vehicles is primarily dictated by the invisible hand of the market—market forces of supply and demand. However, in practice, external factors such as government interventions, including subsidies and tariffs, can distort prices. These policies aim to encourage adoption of cleaner vehicles and can artificially lower or raise prices, leading to deviations from pure market-determined prices (Schiller, 2013). Nonetheless, as technological costs decrease and the infrastructure becomes more widespread, market forces increasingly play a dominant role in setting prices without external influence.

Recent Shifts in Demand and Supply Curves

Over the past few years, the demand curve for electric vehicles has shifted to the right, driven by heightened environmental consciousness, technological improvements, and supportive policies. The COVID-19 pandemic also contributed to increased interest in sustainable transportation alternatives. Conversely, the supply curve for EVs has shifted to the right significantly due to decline in battery costs, advancements in manufacturing techniques, and expanded infrastructure. These shifts reflect the dynamic nature of the EV market, characterized by rapid technological progress and evolving consumer and policy landscapes.

Conclusion

In summary, the electric vehicle market exemplifies how various demand and supply drivers influence market equilibrium. While market forces predominantly set prices, external interventions can modulate them temporarily. Recent years have seen notable shifts in both demand and supply curves, emphasizing the importance of technological innovation and policy support in shaping market evolution.

References

• Egbue, O., & Long, S. (2012). Barriers to widespread adoption of electric vehicles: An analysis of consumer attitudes and perceptions. Energy Policy, 48, 717-722.
• Huang, W. H., Chen, S. L., & Peng, J. (2021). Consumer adoption of electric vehicles: An integration of the theory of planned behavior and diffusion of innovation. Sustainability, 13(3), 1503.
• Schiller, B. (2013). The macro economy today (13th ed.). McGraw-Hill Education.
• Turrentine, T. S., & Kurani, K. S. (2007). Car Buyers and Fuel Economy—Three Paradigms. Transportation Research Part A: Policy and Practice, 41(6), 489-502.