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MGT 448 - Economics for Sustainable Business

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University of Phoenix

   

Global Business Strategy (MGT 448)

   

Added on  2020-03-01

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MGT 448 - The study evaluates the impact of the same on the Electric Vehicle market as well as the petrol vehicle market in India. Lastly, the influence of the proposal of lowering the GST on batteries on the Indian government’s target of a 100 percent EV nation by 2030 has been discussed in the essay paper as well.

MGT 448 - Economics for Sustainable Business

   

University of Phoenix

   

Global Business Strategy (MGT 448)

   Added on 2020-03-01

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Running Head: ECONOMICS FOR SUSTAINABLE BUSINESS1Economics for Sustainable BusinessFollowing the guidelines of the Course ID guidelinesStudent’s NameUniversity
MGT 448 - Economics for Sustainable Business_1
ECONOMICS FOR SUSTAINABLE BUSINESS2IntroductionOn the subject of implementing the Goods and Services Tax (GST) in India, the study identifies the impact of lowering the GST levy on batteries from 28 percent to 5 percent on the Indian battery market in terms of price, quantity demanded, consumer and producer surplus (Mishra, 2017). Also, the study evaluates the impact of the same on Electric Vehicle market as well as the petrol vehicle market in India. Lastly, the influence of the proposal of lowering the GST on batteries on the Indian government’s target of 100 percent EV nation by 2030 has been discussed in the essay paper as well. Q1By lowering the GST levy on batteries from 28% to 5%, the purchasing price of battery will be reduced. As the consumers have to pay less tax, it can impact the selling price of a battery(Creedy, 2016). In the meanwhile, if the other factors such as supply side remain constant, a price drop due to tax reduction can increase the quantity demanded in the free market.Figure: Impact of Tax Deduction on Demanded Quantity of batteriesSource: (Forstater, 2017)
MGT 448 - Economics for Sustainable Business_2
ECONOMICS FOR SUSTAINABLE BUSINESS3As described in the above figure, decrease in the GST levy on batteries from P1 to P2 will also reduce the price of batteries. Therefore, the quantity of battery demanded will increase from Q1 to Q2. Evidently, the consumer and producer surplus of battery market will be affected due to decline in the GST levy. Clearly, lower price of batteries due to tax deduction should increase consumer surplus. In the meanwhile, due to price fall in batteries, the quantity demanded of the product will be increased. Hence, the consumer surplus will be increased (Cowan, 2012). On the other hand, lower price of batteries will reduce the producer surplus if other factors remain constant. Invariably, if the cut down on the GST levy reduce the price, it contributes towards lower potential producer surplus as goods supplied will be reduced (Ma, 2015). Therefore, the triangle of producer surplus will be smaller indicating lower producer surplus. Q2However, the reduction in the GST on batteries will reduce the manufacturing cost of the EV that will further help the EV producers to reduce the price of the vehicles in the market. Hence, the fall in the price of EV being a complementary product will result in an increase in the demand for the product in the short run (Balkyte & Tvaronavičiene, 2010). A diagram has been presented herein below for further understanding:
MGT 448 - Economics for Sustainable Business_3

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