Management Economics Assessment 1

This report covers demand and effects of several factors on goods and services of General Motors. It evaluates product nature in terms of elastic or inelastic and analyses different pricing policy which benefits in generating higher profits.

Management Economics

Contents
INTRODUCTION...........................................................................................................................1
MAIN BODY...................................................................................................................................1
Describing the business and its main product or service..................................................1
Identify the demand and market equilibrium which influenced the demand of their
products.................................................................................................................................2
Indicate the elasticity or more elasticity of demand for the given factors......................6
References:.......................................................................................................................................8

INTRODUCTION
The management economics is the branch which includes the application of economics
methods in managerial decision-making process. The economics aims to provide an framework
which is directed for maximising profit outcomes of company. The economics is stream of
management studies which puts prime emphasis on solving business problems and decision
making. It is related to study of how consumers, firms and governments make decision for
determining together for allocating resources (Cawley, J and et.al., 2019). It is study of
understanding production, consumption and transferring of wealth in marketplace for ensuring
effective growth and development in economy. The report is based on GM (General Motors).
The report is going to cover demand and effects of several factors on goods and services of
demanded. This also evaluates product nature in terms of elastic or inelastic. Further, it also
makes analyses of different pricing policy which benefits in generating higher profits.
MAIN BODY
Describing the business and its main product or service
The GM (General Motors) it is an American multinational automotive manufacturing
company which was founded in 1908 by William C. Durant. The company headquarter is located
in Detroit, Michigan. It serves in worldwide with sales volume of 10 million vehicles. This offers
premium quality of vehicles (Fernandes, A.C and et.al., 2017). The General Motors employees
212000 employees and runs its business in more than 140 countries. It deals in the products of
Auto mobiles, its parts and commercial vehicles.
Chosen product
The selected product for the organisation is General Motors which provides the superior
quality of vehicles and having luxury products. The company is available due to the customised
demand for products and demand of the goods are majorly depends on consumer income level,
establishes premium product which incurs high cost. Henceforth, with the change in prices there
is no change in demand of such goods.
Explanation for choosing that product
The General motor is known for its premium vehicles and cars which helps in giving
understanding for the goods through market research which help company in attracting large
group of upper-class customers (Gluch, P. and Svensson, I., 2018). The purchasing power is
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sufficient in market for the upper-class consumers. The people who want to maintain their status
majorly own luxury cars by owing premium car and having interest in owning the car.
Identify the demand and market equilibrium which influenced the demand of their
products.
The demand defines to tendency for the respective over the specific product and
consenting for pay to trade good by showing the purchasing preferences of individual over
products and services. This is an economic principle that relates to consumers' desire to buy
goods and services by Keep of all other factors constant (Hail, S., 2018). The increase in price of
goods or services decrease quantity demanded and vice-versa.
The law of demand states that there is an inverse relationship between the prices and
demand being other factors constant. It is one of the most fundamental concepts in economics
which defines how market economies allocate resources. The higher the price, the lower quantity
demanded because of diminishing marginal utility. In context to General Motors there is no
change in car demand due to change in prices of car as it deals with luxury products. This occurs
in the expectation of law of demand and this concept is not applicable for luxury goods. The
income is the main factor for General Motors which can affect the demand with the increase in
income the demand for such goods can be increased and vice-versa for the luxury vehicles.
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The equilibrium defines whether the demand and supply for the commodity are the same
or the same. In equilibrium there is no difference between the market demand and the supply of
production as the want and desires of the ability clients are satisfying this means that there's no
alternate in patron income, charge of substitute, charge of complementary, flavor and alternatives
of individual (Hoogstra-Klein, MA and et.al., 2017). The increasing demand at specific
merchandise because of cost decreases and when the interest for specific products diminishes
because of cost builds, this peculiarity influences the market balance. As a component of General
Motors, request doesn't change because of changes in the cost of auto mobiles and vehicles. The
organization works on request or on a pre-request premise and doesn't include overproduction.
Different variables affecting the interest for the unrefined substance are clarified as follows:
 Price of substitutes- These are the products which may be changed with the opposite
product to be had with in the marketplace however in case of luxurious goods, the law of
demand fails as there may be no alternate with in law of demand for the product because
of alternate in its prices (Korankye, B., 2020). In case of General Motors, this is the top
version of the business and there may be no substitute within the marketplace as they
may be supplying top class automobiles that's definitely relies upon the earnings stage of
the consumer.
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 Price of complements- This defines goods that can be used in conjunction with another
product or together. A supplementary product for the vehicles is fuel, since vehicles
without diesel or gasoline cannot be operated, which affects the demand for the vehicles.
As fuel prices rise, the demand for vehicles decreases as people want to spend less on
fuel. On the other hand, the decline in fuel prices will increase the demand for vehicles as
people will spend more on fuel to travel the huge distance with less fuel.
 Consumer Income - This is the basic pay, or salary, of a person earned through their job
or business. For example, when people have enough income to buy expensive goods. In
the situation of not having sufficient income level the people stick to inferior or normal
goods (Paltriguera, L and et.al., 2018). In framework to General Motors the sufficient
purchasing power of consumer leads to increase in demand and on the other side, if there
is not enough purchasing power this leads to decreases in demand and there is no
approach for the car.
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 Consumer taste and preference- It is a factor of reflecting choices and consumer
preferences for the purchase of particular product or service. The demand for the good
increases when choices and preferences of consumers are in favourable terms. On the
other side, the demand for the goods and services are decreased due to the unfavourable
terms of taste and preferences (Pascal, D and et.al., 2017). In context to General Motors
the purchasing behaviour and consumer interest are favouring to vehicles which increases
demand and if perception of consumer is changes to not harm the environment by using
fuel them demand for vehicles in auto mobile decreases as complimentary goods for car.
 Demographics- To the specific company there are several numbers of potential
customers who are loyal and effective purchasing for the goods and services is made. In
the General Motors the upper class are target people which offers luxury products and
people are also with sufficient purchasing power capacity in order to make purchase. This
also helps the business to have higher profits. The majority of the people have interest in
owning the premium car when taking about the luxury cars for maintaining their status.
The majority of the people aged between 30-50 groups is looking for automotive
vehicles.
It is being evaluated that change in income level of consumer impacts demand for
vehicles as it is been cleared from the above people having sufficient purchasing power can only
buy the expensive cars (Saputra, P and et.al., 2018). Here, the law of demand fails due to car
belongs to luxury goods when there is no such impact on change in the demand due to changes in
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their prices. It is a status symbols for the society which incurred high income from the consumer
for making the better choices of premium cars and vehicles.
Indicate the elasticity or more elasticity of demand for the given factors.
The elasticity of demand refers as change in consumption of commodity with the change
in price of products in several factors that is affecting commodity demand. It is a measure of
variable which is sensitive change in another variable (Schmidt, E and et.al., 2017). This is
predominantly used for assessing change in demand of consumer as result of change in goods or
service prices. The demand for goods or services is relatively static even when price changes
then demand is inelastic. The formula is-
Price Elasticity of Demand= % change in Quantity demand / % change in price
This is the formula of price elasticity used by many economists who understand the
change in demand in terms of the change in their prices. There are several factors that have a
major impact on the demand for raw materials in the target market. There are also few
commodities that affect the change in demand due to price changes. As an example, it can be
assumed that luxury goods are inherently inelastic because when the prices of vehicles are
increased, the company's demand for a better understanding of the market does not change. In
the context of General Motors, the rise in the price of luxury goods and the demand for such
goods remains the same as there are luxury products in the market (Spash, C.L., 2020). People
have great interest in General Motors which leads to an increase in the demand for vehicles and
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the demand for vehicles is inelastic because the change in price does not affect demand and
customers have fewer options to buy premium cars.
 Substitution effects- They are products that can be replaced with other products that
offer the same level of satisfaction. The effective market research is formed to meet the
market demand and the customer base is maintained. When the price of replacement
products increases, the demand for the current product increases. On the other hand,
when the price of replacement products goes down, the demand for the current product
goes down as well, as other companies offer products at affordable prices so the customer
stays with the same brand / product (Tiwari, AK and et.al., 2018). As part of General
Motors, it provides premium maintenance and has company luxury products. In this way,
there is no such impact of value changes, the interest for products continues as before,
and the law of interest doesn't make a difference to such merchandise. The interest for
such items is emphatically connected with their costs as an ever-increasing number of
individuals will attempt to purchase vehicles when the costs are high. They principally
centre around the administrations offered and the model of the vehicles.
There is in elasticity for the cars demand as no such change with the demand of car due to price
change.
 Income effects- It is the base salary, or compensation, earned by the person doing any
type of work or running a business. If the consumer's income rises, there is also rise in
demand for the goods. There is a positive relationship between the price and the demand
for the commodity. In context to General Motors, if the consumer has higher income
levels, the demand for cars rises as more people will buy luxury cars and if the consumer
does not have a sufficient level of income, then the demand for such goods disappears
and people know they are buying can those cars.
The percentage of income spent on buying cars is high because they are luxury goods and
consumers have to pay more for the premium cars. These are the products preferred by the
upper class as they have a sufficient level of income and the ability to be shipped when
buying a car and maintain their status through premium cars.
What is the pricing policy that business employs and why?
Businesses have diverse evaluating approaches as they neglect to hold fast to the
particular rules as per the market situation and changing client interest. There are a few factors
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that show the need to change the organization's valuing strategy dependent on the expense of the
specific area, the requirements of the objective market, and the pay levels of shoppers. These are
the elements that will assist organizations with choosing the fitting estimating technique to
accomplish more noteworthy productivity in various market areas. Distinctive valuing rules are
recorded underneath:
Price discount and allowance: These are the policies that are offered to the customer as rewards
for their early payments, bulk purchases, and immediate payment to the customer. They also
include cash discounts that are given to customers so that they can shop effectively in the market.
Geographical pricing: This is the arrangement of evaluating applied by the associations
understanding to the different market areas for serving to enormous section of the market
(Vasigh, B and et.al., 2018). This assists them with setting the distinctive evaluating approaches
so they can cover the diverse market areas by setting various costs of the item as per the interest
in each market. This assists with producing higher benefits so they can get by in the cutthroat
market.
For the discussion above, it should be noted that Toyota must apply the discount and
discount policy to cover the large market and generate higher profits.
CONCLUSION
From the above discussion it is concluded that demand and elasticity are the essential
elements that determine the functioning of the market and the sale and purchase of goods. This
file is mainly based on luxury items and these are the expectations within the demand regulation
where the demand does not change due to price changes. There are several factors that have a big
impact on demand, but income is the main factor that can determine demand for cars as people
with sufficient purchasing power increase the demand for goods. There are different valuation
guidelines that the company applies depending on market conditions, but the company uses
discounts and rebates to attract a large group of potential customers.
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References
Books and Journals
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Fernandes, A.C and et.al., 2017. Supply chain management and quality management integration:
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practices: purposive and co-creative actions across multiple levels. Construction
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Hail, S., 2018. Conclusion—Economics for Sustainable Prosperity. In Economics for Sustainable
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Hoogstra-Klein, M.A and et.al., 2017. Analysing scenario approaches for forest management—
One decade of experiences in Europe. Forest Policy and Economics, 85, pp.222-234.
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Enterprises in Ghana. International Journal of Management, Accounting and
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Paltriguera, L and et.al., 2018. An analysis and valuation of post-designation management aimed
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Saputra, P and et.al., 2018. Job satisfaction in compensation, environment, discipline, and
performance: evidence from Indonesia higher education. MEC-J (Management and
Economics Journal), 2(3), pp.217-236.
Schmidt, E and et.al., 2017. Determinants and impact of sustainable land management (SLM)
investments: A systems evaluation in the Blue Nile Basin, Ethiopia. Agricultural
Economics, 48(5), pp.613-627.
Spash, C.L., 2020. Greenhouse economics: Value and ethics. Routledge.
Tiwari, A.K and et.al., 2018. Impact of oil price risk on sectoral equity markets: Implications on
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Vasigh, B and et.al., 2018. Introduction to air transport economics: from theory to applications.
Routledge.
Books and Journals
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