Ask a question from expert

Ask now

Production cost in India | Report

7 Pages1279 Words130 Views
   

Illinois Central College

   

Economics (ECON102)

   

Added on  2020-02-24

About This Document

The document discusses the manufacturing costs in India, as well as the decision-making process for solar energy storage manufacturers. The study includes a variety of topics that are pertinent to this report, such as analyzing the influence on market outcomes in terms of price, quantity, consumer and producer surplus, and examining the impact of cutting the GST on batteries from 28% to 5% on India's petrol car market.

Production cost in India | Report

   

Illinois Central College

   

Economics (ECON102)

   Added on 2020-02-24

BookmarkShareRelated Documents
Running Head: Production cost in IndiaDecision Making for the Solar Energy Storage ManufacturersStudent NameInstitutional AffiliationCourse/NumberInstructor NameDue Date
Production cost in India | Report_1
Production Cost in India2Decision Making for the Solar Energy Storage ManufacturersQuestion 1The current goods and service tax for batteries in India is very high at 28% (Mishra, 2017). This is an interpretation that the costs of battery production are very high. Tax is one of the most important cost of production that cannot be avoided. This is the reason why most of the times it distorts the level of production. The producing firms are requesting a reduction of this GST to 5% so that they will be able to produce efficiently at a lower cost. If the proposal is accepted and the GST is lowered to 5%, the price for batteries will fall; this is because, goods produced at a lower cost are sold at a lower price (Autocarindia.com, 2017). The lower price will lead to the demand for batteries rising to a higher level; there will bean increase in quantity of batteries produced since the lower cost will stimulate the producing companies to produce more output. On the other hand, the consumer’s increased demand will create a need for increased production and since these companies have that potential, quantity produced will rise. The consumer surplus will rise since they will be willing to pay more for the batteries but the price offered will be cut. The producer surplus will fall since they will be willingto sell at a higher price, but will be selling at a lower market price.
Production cost in India | Report_2
Production Cost in India3Fig: Demand for batteries after GST is loweredAt the GST of 28% on batteries, the price for the batteries was at level P and the quantity for batteries demanded was Q. The lowering of the GST to 5% will result in the price falling from P to P1. This price will stimulate additional demand; demand will increase from Q to Q1. The arrows show the price and the quantity movement; the movement is on opposite direction and thus the inverse demand curve.Question 2Rechargeable batteries are a compliment to the production of electric vehicles (Economicpoint.com, 2016). Thus, the lowering of GST to 5% will increase the demand for electric vehicles. In economics, if the price of a compliment good falls, the demand for the other good goes up (Munson, 2014). Owing to the lower price of batteries which is an input to Electronic Vehicle (EV), the price for EV will also be lower. At a lower price, the demand for
Production cost in India | Report_3

End of preview

Want to access all the pages? Upload your documents or become a member.

Related Documents
MGT 448 - Economics for Sustainable Business
|8
|1550
|17

Economics For Sustainable Business Report GST In Indian Economy
|8
|1506
|236

GST Levy on Batteries 7 Running Head: GST Levy on Batteries 7 Running Head: GST Levy on Batteries 7 Running Head: GST Levy on Batteries 7 Running Head: GST Levy on Batteries 7 Running Head: GST Levy o
|7
|1277
|171

ECONOMICS GST Hike in Battery
|6
|1320
|266

BU1003 - GST on Solar Panel Batteries
|9
|1478
|67

Macroeconomic Principles 6 Running Head
|7
|1601
|361