Question

LO1 - The government is concerned on the impact that Brexit may have on the UK car industry. Explain which factors you think are key to the Supply and Demand for UK cars:

1. Evaluate how demand and supply result in price equilibrium in the car market.

2. Analyse factors that may cause supply and demand for UK cars to shift.

3. Evaluate how government intervention in a market can cause the car market to change.

Answer 1

U.K exports over 80% of the cars it produces. The major factors of the demand in the car market is U.K exports ten cars which produces. The demand comes from.internationalntrade of the car market. Demand factor is also caused by the diesel and taxation policy of the government.

The factors which result in the supply and demand for UK cars to shift are investors are losing confidence after Brexit thing, same is with the consumers. The consumers are also afraid to buy because of Brexit. They are afraid if they lose their job. The diesel and taxation policy are also not known what will happen after Brexit.

Too high a demand of a car price will not help, as the consumers will not buy that. Keeping a price too low will not make profit to a firm. Hence, both the consumers and suppliers have to bargain to a price which will be beneficial for both. This price is the equilibrium price. This is how an equilibrium price is being determined.

If the government invests in the car market, this will result in the production of cars. Even if the consumers in the domestic sector do not buy the cars, the cars can be exported to other countries. This will raise the income of the country, thus the overall economy can improve.