Management Economics Assessment 1

Management Economics.

TABLE OF CONTENT
INTRODUCTION...........................................................................................................................3
MAIN BODY...................................................................................................................................3
Describing the business:..............................................................................................................3
Demand and Market Equilibrium................................................................................................4
Substitution Effects. Luxury vs. Necessity..................................................................................7
Indication of demand in the market:............................................................................................8
Pricing policy which should be adopted by the company:..........................................................8
CONCLUSION..............................................................................................................................10
REFERENCES..............................................................................................................................11

INTRODUCTION
Management economic relates to the branch of economic in which the methods of decision-
making process involve. Therefore, the managerial economics aims to provide the framework to
maximize the profit of the organization. This report includes the information about the GM,
Ferrari an auto mobile company. Information includes the demand and market equilibrium and
price elasticity of demand.
MAIN BODY.
Describing the business:
Ferrari is one of the most successful car manufacturing company, this company
manufacturing super luxury cars and help people to increase their image and lifestyle. Ferrari
belongs to auto mobile market where the competition is very high, this company is still standing
in the market with the brand name and image they have created (Yates, 2019). This Italian car
manufacturing company manufacture sports cars with the aim to increase the lifestyle of people
and its super luxury car designed fulfil the demand of expensive taste customer. When looking at
history of this company, Ferrari was established in 1939 by Enzo Ferrari, the owner have been
looking to enter racing line with their own super fast car. The history of this company clearly say
that, Ferrari was interested more in racing. The with the identification of the demand this
company have been continuously manufacturing super fast sport car with excellence of Italian
design and price that only cane be affordable by good income level group customer. Ferrari own
various world record and the most recent was, the world record for most expensive car in the
world. This company manufacture cars and have wide range of products in car segment. Ferrari
actively contribute in the betterment of the economy, this company is well know for its high
price with attract most of the customer outside Italy. Ferrari do not have any type of car segment
which other car manufacturer have, this company have one segment which is related to sports car
model (Ferrari, 2021). The main product of the company is sport car and service provided by the
company fall under the service offered such as after the sell service and other service. There are
many other car manufacturers in the world but the Ferrari is well-known for its brand name and
image.

Demand and Market Equilibrium
Demand refers the demand of the goods and service in the organization and therefore, this
identifies that how much consumer want the product that organization sell. The total number of
purchase of the product that organization sell indicates towards the demand of theta particular
product (Xing, . and Xiaofeng, 2021).
Market equilibrium indicates the price when the supply of goods matches the demand and
significant the behaviour and dynamic process that identify the outcomes. Basically, this
determines that when market demand and supply are on the same point of the product therefore
this is called equilibrium point.
Price of substitutes: there are a lot of products that similar or substitute of the GM Ferrari such
as; Lamborghini Urraco, Porsche 911 turbos, Audi etc. therefore organization has to be very
concise according to their design and style for the betterment of the organization. The price of
the substitute which is mostly Audi for the company is Higher than the company product price.
As the Audi price is increased in compare to the Ferrari (Garcia-Muiña, and et.al 2019).
Increased in the demand indicates the lower demand therefore this will be beneficial for the
company that their substitute product price are increased and thus, the supply of the different
product responds towards that demand differently. If the price decrease of the product than the
demand also increase that's why Ferrari price decrease and increase in the demand of the product.
There are a lot of competitors of the GM Ferrari in the market but for the betterment of the
company and compete with their competitor they have to learn accordingly.
Price of complements: complements goods or services of the product that organization has
determined the value adding to another. This describes the product that consumer use together
with the product that they sale to the customer. Complements goods are those goods which are
consumer together. The skills of the organization determine the customer base and feasibility to
meet the expectation of the customer. The company give to the complementary products to their
customer such as, welding, assembly, heat treatment etc. the demand of the complementary
goods also indicates towards the demand curve. The demand of the goods increases that describe
the price of the complementary will also increase. Price of the one complementary goods
indicates the negative relation among the other goods of the complementary. Increase in price of
the complementary goods leads towards the fall in demand of the another complementary goods
(Ferrari, and Queirós, 2021).