Management Economics: Demand and Market Equilibrium

This article discusses the concept of demand and market equilibrium in management economics, with a focus on the automotive industry and General Motors. It explores the factors that influence the demand for GM products, such as consumer preferences, substitutes, and market perceptions. The article also provides an analysis of GM's sales figures over the past decade.

MANAGEMENT
ECONOMICS

Contents
INTRODUCTION...........................................................................................................................3
TASK 1............................................................................................................................................3
1. The business and its main product or service.....................................................................3
2. Demand and Market Equilibrium.......................................................................................4
3. Factors that influence the Price Elasticity of Demand.....................................................10
CONCLUSION..............................................................................................................................13
REFERENCES..............................................................................................................................14

INTRODUCTION
Management economics is defines as the market strategy theory that encourages major
elements like income and spending, money, etc. to be efficient in combination. In addition,
management in a company uses this concept to tackle such business-related problems and
requires a range of key concepts and decision-making strategies (Teece, 2019). In general term it
is among the main principle which distinguishes different economic perspectives as a
comparison between market strategies for strategic decision making. These options are directed
towards cost savings and increasing efficiency by efficient businesses and productions.
The report will concentrate on how firms use the market economy theory to explain their
recent actions and to forecast future company performance. In the study, General Motors is
chosen which deals in car industry because it is cantered in several countries, where the supply
of raw materials as well as market changes has a significant impact on the growth of the vehicle.
In this study, various variables that aim to assess if the competition for GM products is elastic or
inelastic are evaluated to examine this subject.
TASK 1
1. The business and its main product or service.
The automotive industry is a highly developed sector which is increasingly growing its
global market. Companies in various nations involved in the manufacture and sale of millions of
cars, buses as well as other vehicles each year (Sfeir-Younis, 2019). By turn, this would help
expand the economies of a nation and contribute to the overt or tacit development of jobs for
millions of people. In fact, the automobile industry also bears responsibility for the use of
petroleum or oil. Therefore, in studying the theory of managerial economics, the chosen
automotive area is more useful, because it analyses entire issues that are important to their
analysis.

General Motors (GM), for example, is among America's leading corporations, and exports
its products across the world. A number of methodologies are being developed for the
manufacturing of luxury cars, such as Chevrolet, GMC and Cadillac, which allow this company
to generate the desired quantity of luxury brands annually compared to its competitors. Financial
research has established that Chevrolet is one of the world's leading car firms whose sales are
approximately. The revenues of more than USD192.6 trillion and 9.17 million a quarter (General
Motors boost transition, 2018). It has really proven that the GM product market is greater than
other others, such as Ford, Toyota, Volkswagen and others. In relation to the 12 brands, General
Motors owns a 20 percent interest in IMM as well as GM Korea has a 77 percent share. It has
several other joint-ventures in China, like Shanghai GM, SAIC-GM-Wuling and FAW-GM, GM
Uzbekistan, General Motors India, General Motors Egypt, and Isuzu Truck South Africa.
General electric employees 212,000 workers and works in even more than 140 nations. G.M
comprises four operating segments: GM North America (GMNA), GM global companies
(GMIO), Cruise as well as GM Financial. The organization also maintains a mobility subsidiary
named Maven that provides car-sharing program in the United States and therefore is exploring
alternatives to the possession of individual vehicles. GM Protection is the defence department
unit of General Motors which meets the military's requirements for technological advancements
and armoured vehicle launch systems. General Motors has dominated worldwide average car
sales for 77 successive seasons from 1931 to 2007, more than almost any other automotive
producer, and is one of the nation's leading vehicle manufacturing groups.
2. Demand and Market Equilibrium
There are a number of variables that have the potential to affect the demand of different
types of goods and services. It is when a company is newly established and as a result of which
critical quantities of variables react successfully as consumers require, they claim a particular
viewpoint (Grimsrud, Graesse and Lindhjem, 2020). This is therefore important for a firm to
concentrate on all those elements that have a major impact. In the lack of understanding of these
aspects a business will have a number of challenges to improve product demand. Consumers are
among the primary factor among all the variables, since they are just those that can raise product
demand. For the above-mentioned product, therefore, it is essential to analyse the factors listed
below in such an efficient manner which can boost demand for company cars and other motors.

The availability and demand for a given good or service is interconnected as per modern
economics i.e. supply and demand law. The two major principles are known as the economy's
equilibrium which has a direct effect on the price of the product. The car industry is composed of
variables that influence demand for products like personal and premium vehicles. The price
includes substitutes and complementary goods, consumer expectations & desires, views of the
market, patterns etc. The impact of these factors on the general market for engines can be
measured in the following manner:
 Substitute price: Substitute goods are nice in probability theory which can be used rather
than other goods (Varshavskaya and Kotyrlo 2019). By business theory, substitutes are
goods which consumers consider similarly or proportionately, so having and over one
commodity causes the consumer to demand less of some other commodity. When the
price of the good complementing a productive decline declines the total quantity and the
demand declines with the other product. If the costs of a replacement good drops, the
amount required also for good will increase, but the demand for both the good will be
balanced by decreases. Increases in substitute’s rates on a given market may also have a
direct effect on the same competition. The development of engine replacements in the
automotive industry helps in a high car sales. To this end, GM's alternatives include
conventional and more powerful gas engine vehicles, zero emissions, and plug-in hybrid
vehicles, respectively. While these substitutes' level of risk is deemed a weakening factor,
thanks to the highly modern technology and fuel-efficient GM vehicles.
 Cost of supplements: This aspect involves the cost of products such as cars and various
forms of transport that have an impact on the car industry. Consequently, when the prices
of other suppliers, such as those in partnership with GM, are raised, their main
competitors are Volkswagen, Toyota and others. This would favour GM by adjusting the
market accordingly, because customers will first choose the image of their car
irrespective of the cost when buying vehicle issues.

 Consumer taste, expectations & preferences: This is defined as subjective (individual)
preferences in specific utility-determined packages in goods. We request that the
consumer classify the commodity packages according to their level of effectiveness. The
desire to buy goods does not change a customer's likability or disdain. This aspect
produces a significant change in the product’s demands, either positively or negatively.
Consumers thus prefer to buy more efficient vehicles and use less fuel, mainly since they
recognize that emissions is that, often as a result of high-consumption vehicles. Another
reason for changing customer preferences is ingenuity and high-tech inventions from
which cars designed and manufactured in accordance with their personal preferences and
living conditions can be procured.

 Market perceptions: Consumer desires are formed in the perceptions of consumers in
terms of their own awareness and information, combined with the previous expertise and
experience (Rouziou, 2019). Consumers have both explicit and tacit expectations for the
value and the quality they have received. Automotive consumers chose to purchase cars
that offered better safety and safe driving. They highly expect vehicles to be as
economical to accommodate their requirements, depending on financial income, fuel
usage, pollution etc.
 Demographic: This refers to regularly expressed socio-economic figures, including
employment, schooling, incomes, marriage, birth and death, and more. Demographic
developments are now influencing the picture of cars where the customer's behaviour is
strongly affected by sports car racing, self-driving vehicles, accessibility and many more.
Car users then drive to cities easily and take full advantage of the trip by rail. It will also
help to boost the portion of income in the car industry by increasing vehicle
manufacturing. The demand for GM Motors is growing steadily due to the success of the
electric vehicles, as per statistical data. The population change, i.e. human immigration in
the developing world, the Eu, Sweden, the US and other developed nations, makes the
highest share of passenger vehicles (ELECTIC VEHICLE SALES-VISUAL
CAPITALIST, 2018).

Although it can be observed in the estimation of factors that price dynamics and customer
preferences have driven demand for GM cars (Koval and Mikhno, 2019). Highly advanced
cars have helped to maintain market awareness of products, like fuel efficiency, hybrid plug-
ins, safety and much more. This would encourage them to meet the requirements, as well.
Market demand for General Motors an automobile is now increasingly rising on the
marketplace and, shown below, also can make assumptions sales production over the last 10
years.
Sales figures for G.M during last ten years:
Year General Motors Annual
Revenue

(Millions of US $)
2018 $147,049
2017 $145,588
2016 $149,184
2015 $135,725
2014 $155,929
2013 $155,427
2012 $152,256
2011 $150,276
2010 $135,592
2009 $104,589
2008 $148,979

Abovementioned table indicates that such a company's marketing income has been rising
year without year using efficient manner (Ketokivi and Mahoney, 2020). The explanation for this
is that they are exceptionally efficient at marketing their products. Production output is indeed
stronger and leads to even more gross profit. However, sales declined between 2008 and 2009
when their profits plummeted by $44,000. The explanation behind that decline is this year's
production in new technologies. Basically, if a firm introduces its plan or policies for
manufacturing its products so competition can be decreased. It's how consumers will take longer
to trust in the latest product of the business or not. When the commodity is delivered and due to
consumer expectations, the revenue from sales grows quickly. So during the year 2008 to 2009
this started happening with the above service. Their income never decided to drop and the year
2009, and it began to increase effectively. It is also important for businesses to keep regular
consumers in order to raise competition and increased competition is an indicator of greater
brand and product sales.
3. Factors that influence the Price Elasticity of Demand.
Although there are several factors, such as consumer preferences, replacement and
alternative costs, etc., which have a positively and negatively influence on the economy for
General Motors products in the automotive industry. Consequently, this company is actively
upgrading its products and services to solve these challenges and maintain its brand recognition
(Xia, Schaafsma and Hooker, 2020). For example: transforming GM vision into zero emissions,
zero crashes and zero contamination on a global scale to minimize and improve the likelihood of
replacements. It is also stated that enhancing considerable cost savings as well as capitalizing on
economic stability in the long term it will further speed the transformation of production process
market policies. It includes restructuring the production system of corporate goods, a fresh focus
on key properties and distribution power. The related company, in effect, also plans to take
constructive steps to improve overall sales performance. These programs would aim to further
increasing their turnover levels.

GM is analysed to maintain its leading position in the car industry by continuously
upgrading cars and incorporating more innovative innovations to satisfy the demands of
consumers, as per the statistical findings. GM is now expanding its multinational workforce and
processes to drive the world's highest quality practices and state-of-the-art technology to improve
the performance and qualities of its vehicles. In this step, the respective company focuses on
improving the sharing of high quality materials within its inventory for successful product
development, particularly those cars which are not identifiable and understandable for a targeted
audience (SCHAEFER, 2019). Common factors of the exchanging of products include extending
the use of technical technologies by merging their cars and driving resources for decreased
processing time and expenses. General Motors has now invested in the new and highly efficient
design of vehicles, especially in SUVs, utilities and crossovers that meet the needs of customers.
This also plans to target on car development, in particular any next generation fuel-
efficient as well as battery-powered models, which will improve its output on the global market.
The table above found that there are significant firms offering customer base in sales. It shows
that Renault firm's market position chart has risen in the current year on average and higher than
two other firms when it was in the beginning year of 2005. This graph has fluctuated in previous

years although that can be seen in the general engine industry dimension; their market share is
increasing in the present year. This chart of profit margin began to fall after the year 2007,
contributing to lower market penetration. Like the Toyota motor corporation, their sales volume
also grew from 2005 to 2007, but afterwards this position began to decline effectively. Poor
consumer facilities and also increased costs of their vehicles were the main cause for this
reduced efficiency. Renault Group, at the other side, has concentrated on improving its consumer
satisfaction and keeping the costs of its goods lower and steady, contributing to strong market
position. So, all businesses like Toyota and G.M are seeking to concentrate on new approaches
that can lead to increased car share of the market and demand.
Lower prices for all products and less buyers' purchasing demands have been calculated
according to industry legislation (Akpolat, 2019). It is then presumed that the quality of vehicles
or of other cars is elastic. People can delay the purchase of new vehicles, especially because their
costs are too high and overpower their revenue. Citizens' preference or unique preference to have
a luxury car as opposed to other commodities is not requirement. Therefore, it has a direct impact
on car demand, as people of high-class areas need costly and technically sophisticated places to
shop. But residents are still using less commuter cars in developing countries or in the middle
income class. Among higher income class individuals, the elasticity of demand for every product
is usually smaller relative to those with low income families. It's because wealthy people aren't
significantly affected by fluctuations in the quality of commodities. Thus poor communities are
strongly influenced by increases or declines in consumer prices. As a result, competition is
extremely dynamic for lower-income groups. Price elasticity of production also has to do with a
span of time. It may be a multiannual day, week, quarter, year or year. Request elasticity differs
widely with time cycle. In the short time demand is typically inelastic. This occurs because
buyers find it impossible, in the short term, to change their attitude to adapt to an increase in the
cost of the given product. Nevertheless, demand throughout the longer rim becomes more
dynamic since, if the quality of the specified product increases, it is relatively simpler to move to
other alternatives.
Through this way, General Motors will adopt an ambitious pricing strategy to increase the
performance of the competitive market. This involves product positioning which gives customers
good incentives at the best selling prices. General Motors needs to continually attract the interest
of western car enthusiasts by the quality of cars. Despite the central message of simple and

transparent pricing (Parnell, 2020), market interest cannot be attained. In the effect, it will
change the message, like 'the Full Value Promise.' Luxury vehicle shoppers will get
commercials.
CONCLUSION
In conclusion, it is stated that Economic management analysis observed that the company
would use key concepts and assumptions to make effective structural changes. A company
should determine how external conditions impact its income and exchange cost, and make
necessary changes by implementing restrictions on availability and production of goods and
services. Management economics figures out across the context of the car industry that the sector
plays a major part in developing the economy by making thousands of vehicles each year. In
reality, large corporations also lead to the reduction of unemployment, which inevitably leads to
better development.

REFERENCES
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Koval, V. and Mikhno, I., 2019. Ecological sustainability preservation of national economy by waste
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Xia, R., and et.al., 2020. Impact of the improvements in Fusarium head blight and agronomic
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