Demand and Supply Dynamics of Electric Cars in Australia

Running head: ECONOMICS ASSIGNMENT
Economics Assignment
Name of the Student
Name of the University
Author Note

1ECONOMICS ASSIGNMENT
Introduction
The term “market”, in economics, refers to the place where the participants in the
demand and supply side forces of different commodities and services, interact with each
other, to determine the quantity of the concerned commodities to be produced or demanded
and also to determine the level of prices in which the transactions take place (Taussig, 2013).
Thus, market plays a crucial role in determine the demand-supply interactions for different
commodities and services. Apart from price, there exit other crucial factors which has
considerable implications on the level of demand for goods and services, which primarily
include the aspects of price elasticity of demand, the price of related goods (substitutes and
complements) and also other aspects like individual preferences (Rios, McConnell & Brue,
2013). Keeping this into consideration, the concerned essay tries to analyse the markets of
electric cars, unleaded fuel and electric charging and also tries to study the changes in the
demand for electric cars depending upon the changes in the prices of the same, unleaded fuel
and electric charging, specifically focussing on these markets in Australia.
Electric Car Market
Electric cars, have been increasingly coming into existence and becoming popular in
the contemporary period, owing to the increasing awareness regarding the level of pollution
and environmental damages done by conventional fuel driven cars and the need to preserve
the environment. The production of the same can be seen to be increasing especially in the
developed and technologically progressive countries (Ustun, Zayegh & Ozansoy, 2013). The
demand for electric car, directly depends on the price of the same, which exist in the market.
In case of Australia, the price of such electric cars varies from nearly $28,000 to $100,000, in
Australia, with the average price level being nearly $40,000. However, as this type of cars are
comparatively new and the supply of these cars are still low, therefore the elasticity of

2ECONOMICS ASSIGNMENT
demand for these cars is high, which in turn implies that a small increase in the price of the
same can decrease the demand substantially and vice-versa. Suppose, the average price of
electric cars in Australia decreases from $40,000 to $35,000 (Järvinen, Orton & Nelson,
2012). The effects of the same can be seen to be as follows:
Figure 1: Demand for electric cars
(Source: As created by the author)
As the demand for electric cars is elastic, therefore, with a small decrease in the
average price of the same, the demand is expected to increase more than proportionately.
Market for unleaded fuel
The demand for electric cars, does not only depend on the price of the same but also
the prices of related goods. One such related product is that of unleaded fuel. This is because,
the direct substitute of electric cars is fuel driven cars, the demand for which depends on the
price of electric fuels. If the price of fuel increases then the demand for the fuel driven cars is
expected to decrease, thereby increasing the demand for electric cars (Leszkiewicz-Kędzior