Hybrid Sales Plunge as Demand Keeps Rising

Essay by elvis21University, Bachelor'sA-, August 2008

download word file, 3 pages 0.0

In the world economy, many products on the market (Colander, 2004). Other factors that affect supply and demand other than price is called shift factors. Shift factors of demand include income, price of other goods, expectations, and tax on and subsidies of consumer. Shift factors of supply include the price of inputs, technology, expectations and tax on and subsidies to producers. (Colander, 2004). Circular flow of goods and services describes how a market economy works. A market economy occurs when individuals influence directly what is produced, marketed, and consumed. In return this influences producers to produce goods and services that people will buy.

According to Brent Snavely, a free press business writer, the demand for hybrid vehicles is considerably higher than the supply of the hybrids offered by manufacturers. Hybrids, those fuel-sipping cars that use both gasoline and batteries but never require recharging, seem to make a world of sense as gasoline prices blow past $4 a gallon.

They pollute less and consume less. The primary drive behind the purchase of a hybrid lies with the ever-increasing cost of fuel. However, the hybrid sales are also increasing due to its appeal to a variety of buyers, good resale value, and a tax break. Customers who want to purchase a Prius, a popular Toyota hybrid, must be placed on a waiting list and cannot even test drive the model because the models are pre-sold before the cars even arrive at the lot. As more companies introduce hybrid models, the demand for the hybrids is expected to grow.

The price of the hybrid vehicles is at least $2,000 higher than the price of non-hybrids. Additionally, the prices of the vehicles are not flexible due to the high demand and negotiations are nonexistent. Thus, supply and demand will simultaneously increase while customers will...