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Chevrolet Corvette Group 17 Erica Gray Zach Gray Nate Hopkins Mike Howley Corvette’s Market Price starts at $44,000 for 2004 Corvette Largest market is middle aged men Buyers are in the upper middle class of the economy

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group 17
Group 17

Erica Gray

Zach Gray

Nate Hopkins

Mike Howley

corvette s market
Corvette’s Market
  • Price starts at $44,000 for 2004 Corvette
  • Largest market is middle aged men
  • Buyers are in the upper middle class of the economy
  • The Corvette is in an Oligopoly because the market composed of a few firms producing a homogeneous product
corvette history
Corvette History
  • The Corvette was first designed in 1951
  • It has gone through many makes and models not only in the body but in the engine
  • The Corvette has been Chevrolet’s marquis sports car for a half century
factors of production
Factors Of Production
  • Land
  • Labor
  • Capital
    • Physical Capital
    • Human Capital
  • Entrepreneurial Activity
factors of production6
Land

The physical space at which production takes place, as well as natural resources found under or on the firm.

Corvette Land

Car Dealerships

Manufacturing Plants

Aluminum, Coal, or other resources

Factors Of Production
factors of production7
Labor

The time human beings spend producing goods or services

Corvette Labor

Car Salesmen

Factory Workers

Factors of Production
factors of production8
Capital

Long lasting-tools people used to produce goods and services.

Human Capital

Skills and training for workers

Physical Capital

Buildings, material and Machinery

Human Capital

Skill for factory workers and Car Salesman

Physical Capital

Machinery and Tools used in factories

Factors of Production
factors of production9
Entrepreneurial Activity

Recognizes opportunity and then takes advantage of that opportunity

Factors of Production
supply

Supply

Is a relationship showing the various amounts of an item that sellers are willing and able to make available for sale at various possible alternative prices, during a given period of time, Ceteris Paribus.

Ceteris Paribus Factors for Supply

1. Input Prices

2. Prices of Alternative Goods

3. Technology

4. Number of Suppliers in the Market

5. Expectations of Sellers

slide11

Supply

  • When Corvette Raises the price of their cars, and all other factors remain constant, the quantity supplied of those goods will increase.
supply12
Supply

Price

  • Change in Quantity Supplied
  • A Movement along a supply curve in response to a change in price.
  • Price increase– Rightward movement, increase in the Quantity Supplied.
  • Price decrease– Leftward movement, decrease in quantity supplied.

S

Quantity

supply13
Supply

Change in Supply

  • A change in any Ceteris Paribus factor of supply, except price, causes a rightward or leftward shift.

Sell more Corvettes -Rightward shift or an increase in supply

Sell fewer Corvettes - Leftward shift or a decrease in supply

S3

Price

S1

S2

Quantity

demand

Demand

The Law of Demand states…

Demand is the relationship between different amounts of an item which buyers are willing and able to purchase at various prices, during a given time period~ Ceteris Paribus

quantity demanded
Quantity Demanded

Price

  • Inverse relationship between price and demand
  • Graph will slope down to the right
  • P D ; P D
  • Inverse relationship between price and demand
  • Graph will slope down to the right
  • P D ; P D

Demand

Quantity

quantity demanded16
Quantity Demanded

Price

  • Movement along the demand curve occurs in response to a change in price
  • When price increases, there will be a leftward movement along the demand curve
  • When price decreases, there will be a rightward movement along the demand curve

D

Quantity

ceteris paribus factors for demand
Ceteris Paribus Factors for Demand
  • Besides the price, there are other factors that influence how much of an item someone is willing and able to purchase at various prices during a given period of time
  • What are these factors and why are they held constant?
slide18
Income
    • Do you have enough to

afford a Corvette?

  • Prices of related goods
    • Is there another sports car for less?
  • Taste
    • Are Corvettes appealing to you?
  • Number of consumers
    • Are there more people willing and able to buy Corvettes?
  • Expectation of consumers
    • Corvette receives high ratings will raise expectations
slide19
When any of the ceteris paribus factors change, the result is a shift of the entire demand curve

Price

Quantity

opportunity cost
Opportunity Cost
  • The value of the next best alternative which must be given up in order to get something.
  • The summation of explicit and implicit costs.
explicit and implicit costs
Explicit and Implicit Costs
  • Explicit Costs=The money actually paid for a choice.
  • Implicit Costs=The value of something sacrificed when no direct payment is made; returns to self-owned factors of production.
explicit and implicit costs22
Explicit and Implicit Costs
  • Explicit Costs of Manufacturing a Corvette
    • Salary paid to labor
    • Expense to purchase supplies (inputs)
    • Depreciation expense
    • Property or rent expenses
    • Taxes
explicit and implicit costs23
Explicit and Implicit Costs
  • Implicit Costs of Manufacturing a Corvette
    • The time and money that could be spent, saved, or earned on something else.
      • Examples:
        • Money that could be earned working at a Mercedes dealership.
        • Time that could be spent patenting a new idea.
explicit and implicit costs24
Explicit and Implicit Costs
  • Explicit Costs of Owning a Corvette
    • Payments made to purchase the vehicle:

Principle Cost + Interest

    • Insurance payments
    • Gas and maintenance expenses
explicit and implicit costs25
Explicit and Implicit Costs
  • Implicit Costs of Owning a Corvette
    • Garage space
    • Any other good or service that could have been purchased with money used to purchase Corvette
short run
Short Run
  • Corvette employs an input in order to produce and output and earn a profit
  • Short Run is the period in which some inputs are fixed
  • In the short run, Corvette could produce more Corvettes by hiring more workers
long run
Long Run
  • Long Run is the period in which all inputs are variable
  • Corvette must decide what combination of inputs to use in producing any level of output
  • In the long run, Corvette may increase their production by building a new plant
substitutes
Substitutes
  • Any good that can be used in place of another good to fulfill the same purpose.
    • Examples:
      • Mercedes-Benz sports cars
      • BMW sports cars
substitutes29
Substitutes
  • A rise in the price of a substitute increases the demand for your good.
economies of scale
Economies of Scale
  • Lower ATC as Quantity increases
slide31

Economies of Scale

  • Specialization and division of labor with assembly lines increases output
  • Corvette pays less for their raw materials than a smaller firm would
economies of scale32
Economies of Scale
  • Large firm allows more money for research and development for more efficient running Corvettes
  • Better use of by-products such as burning for heat
price elasticity for demand
Price Elasticity for Demand
  • Price elasticity is the percentage change in the quantity demanded divided by the percentage change in the price
price elasticity of demand
Price Elasticity of Demand
  • If the price of Corvettes rises and the price of it’s competitors stays the same the quantity demanded will decrease.
profit maximization
Profit Maximization
  • Profits are maximized when:
    • Distance between total revenue and total cost is the greatest (when TR>TC)
    • Marginal Revenue = Marginal Cost
advertising
Advertising
  • Advertising is used by Corvette to differentiate their cars from other competitors
  • It informs and persuades buyers

Why is advertising an important input for a firm to consider?

slide37

Advertising

  • Affects the demand
    • If Corvettes are more desirable, more people will demand them
  • The ads must reach out to the correct target market.