Impact of AutoEdge's Price Increase on Consumer Demand: ECON616 Report

This report analyzes the potential impact of AutoEdge's decision to increase prices and return operations to the United States on consumer demand within the automotive parts industry. The analysis begins by exploring the concept of elasticity, differentiating between various types (perfectly elastic, perfectly inelastic, unitary elastic, relatively elastic, and relatively inelastic) and assessing their relevance to the auto parts market. The report argues that the demand for auto parts is relatively inelastic, suggesting that price changes may not significantly impact consumer behavior, with factors like product quality, service quality, and reputation playing a more crucial role. The report discusses how consumer decisions are influenced by factors such as the quality of the parts, the quality of service, and the reputation of the shop. Furthermore, the report considers the effects of discounts and the importance of maintaining a strong relationship with the customer base. The conclusion emphasizes that AutoEdge should prioritize improving product quality to meet industry standards, as price alone may not drive demand if quality is compromised. The analysis draws upon relevant economic principles to provide a comprehensive understanding of the relationship between price, demand, and consumer behavior in the context of AutoEdge's strategic choices.

Running head: ECONOMICS
Economics
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It had been found from the question that the firm Auto Edge wanted to increase its
price and return to back to the United States which will be affecting the demand of the
consumer. Therefore the board require to know whether it will be the right move and also it
needs information which is related to the elasticity of the industry of the auto arts. Elasticity
is known as the percentage change of any one variable by the percentage change of the other
variable. It also measures the change in the elasticity (Baumol & Blinder, 2015). The price
elasticity usually measures the percentage change in the quantity demanded for goods and
service based on the change in price where al he other factors are held constant. There are
five types of elasticity which includes perfectly elastic, perfectly inelastic, unitary elastic,
relatively elastic and relatively inelastic. The auto parts industry of the auto service industry
does not have much relation with the price of the parts. It have a little correlation with the
price of the auto parts. Therefore it can be said the demand will not be affected by price. It
can be said that price will not increase the demand for auto parts as price will not affect the
market for automotive repair. The factors that the consumers will be looking for will include
quality of the automobile parts, quality of the service provided and he repairing time (Cowell,
2018). Consumers will be considering these particular factors while determining the price of
the parts. Another factor which affects the demand of the automotive parts is the presence of
healthy relationship between the auto parts shop and the customer base. When the shop will
be providing to notch service, dependable parts and long lasting parts along with the
warranties along with a good reputation for the fast and dependable services. Then it will help
in increasing the demand for automobile parts (Nicholson, & Snyder,2014).
The price will be affecting the demand d for the automotive parts when the customer
will be interested in replacing the aging parts when they stop working. At that point of time
of the automotive industry offers discounts or free goods the demand of the parts may
increase. However, price will however not affect the purchase of the parts at that rate (Iossa

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& Martimort, 2015). Therefore it can be said that the price will merely entice the consumer to
buy automotive parts since in case of faulty brakes, tires or with even more complications,
the consumer can expect a bigger bill. If the Auto Edge industry will have issues regarding
poor service or poor quality products, the demand for their products will not price whatever
maybe the price. It can be then said if the price increases the demand will not change if the
automotive parts are not made of good quality products, similarly if the price decreases the
demand will not change provided the quality of the products are changed according to the
need of the consumer (Baumol & Blinder, 2015). This means that the firm Auto Edge should
be improving their quality of goods according to the industry standards. Therefore, from h
above study it can be said that the auto parts industry is relatively inelastic in nature.

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Reference list
Baumol, W. J., & Blinder, A. S. (2015). Microeconomics: Principles and policy. Nelson
Education.
Iossa, E., & Martimort, D. (2015). The simple microeconomics of public‐private partnerships.
Journal of Public Economic Theory, 17(1), 4-48.
Nicholson, W., & Snyder, C. (2014). Intermediate microeconomics and its application.
Nelson Education.
Cowell, F. (2018). Microeconomics: principles and analysis. Oxford University Press.