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Automobile Industry: Demand and Supply Changes

Most of us participate in the economy every day. As households, we can provide labor to firms or government in the input market and we are also consumers of goods and services in the product market. Think of a good that you have purchased in the last six months. If you haven't purchased any goods or services, you can think of some popular items. Find a recent article on that good or the firm that produces it.

Pick an article or good recently purchased, articulately and answer the following questions:

1. Briefly describe the article.
2. Did your demand for the good change? What are some factors that would cause a change in demand for this good? How does quantity demanded of this good change?
3. Give some examples of changes in supply in the context of your good. What would change the quantity supplied?
4. What would happen if the government intervened and lowered the maximum price that could be charged for this service or good. How would this change the output and price?

Solution Preview

Article: Will Americans demand the cars that Congress wants the big three to build?
http://blogs.ft.com/economistsforum/2008/12/will-americans-demand-the-cars-that-congress-wants-the-big-three-to-build/
This is not something I have purchased, but a popular item that is presently being affected by a number of factors.

1. Briefly describe the article:

Written by economist Robert Z Lawrence, the article discusses and offers solutions to the problems faced by the automobile industry and the government in ensuring that the automobile industry in the US will be able to survive in the long run. According to Lawrence, the problem is that US consumers like big cars, SUVs and trucks and so in effect the large US firms are truck companies, not passenger car companies. There ...

Solution Summary

In just over 500 words, this solution presents a discussion from an article written back in 2008 on the automobile industry, considering the price of fuel and its relation to the demand for larger vehicles. This solution gives a detailed description of this article and also thoroughly analyzes this writing in terms of the supply and demand for larger vehicles by U.S. consumers.

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