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Economics & The Automobile Industry

Economics & The Automobile Industry. Mr. Lamberti. The Economy (Market, Mixed, Command). 1.1 Individual, Business, & Government Choices 1.2 Competitive Markets 1.3 Prices, Supply, & Demand 1.4 Role of Government. 1.1 Individual, Business, Government Choices . Will you be a… For Profit

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Economics & The Automobile Industry

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  1. Economics & The Automobile Industry Mr. Lamberti

  2. The Economy (Market, Mixed, Command) • 1.1 Individual, Business, & Government Choices • 1.2 Competitive Markets • 1.3 Prices, Supply, & Demand • 1.4 Role of Government

  3. 1.1 Individual, Business, Government Choices • Will you be a… • For Profit • Not For Profit • Sole Proprietorship (70%) • Partnership (10%) • Corporation (20%)

  4. Auto Companies? • Most auto companies started out as either a sole-proprietorship or a partnership with help of investors. • Once they realized the DEMAND, companies became larger and larger. They began forming corporations and merging together to SUPPLY the need of the growing middle class.

  5. 1.1 Individual, Business, Government Choices • Where will you produce your product/service? • Why should you place it there? • What will you sell? • How should you set it up? • When will you be open? • Who will your customers be?

  6. Where, Why, How… • Where – Europe to America to Michigan • Why – Michigan Wealth = INVESTORS • What – Battery, Steam, Gasoline • How – Handmade to Mass Produced • When – Normal Day to Shifts • Who – Rich to Middle Class to Lower Class (Pricing/Production)

  7. Entrepreneurship Entrepreneurship is the pursuit of opportunity without regard to resources currently controlled. -Harvard Business School The ability to take an idea, product, or service (new or old) and bring it to market. - Mr. Lamberti

  8. 1.2 Competitive Markets • More competition leads to lower prices • Less competition leads to higher prices • Ex. – Ford realizing mass production and having a lower price. (If he did not have competition he probably would have sold the car for more because he would be the only offering cars)

  9. Competition StateGM - Billy Durant - 1908 (MI)Ford - Henry Ford - 1903 (MI)Chrysler - Walter Chrysler - 1925 (MI)NationalTesla - Elon Musk, Martin Eberhard - 2003 (CA)Fisker - Henrik Fisker - 2007 (CA)InternationalToyota - Kiichiro Toyoda - 1937 (Japan)Honda - Soichiro Honda - 1948 (Japan)Nissan - Yoshisuke Aikawa - 1932 (Japan)Mazda - Jujiro Matsuda - 1920 (Ford used to be #1 shareholder but is now 4th largest) (Japan)Tata - JRD Tata - 1945 (Owns Land Rover & Jaguar) (India)Fiat - Giovanni Agnelli - 1899 (Italy)Ferrari - Enzo Ferrari - 1929 (Italy)Rolls Royce - Henry Royce, Charles Rolls - 1906 (England)BMW - Karl Rapp - 1917 - (Germany)

  10. Pricing & Incentives • Can Price be an incentive? • Incentives entice people to buy • Lower interest rate on a loan • Free/cheap upgrades

  11. 1.3 Prices, Supply, & Demand • WHO WANTS CANDY • Free (Scarcity of Supply) • $.25 (Equilibrium Point) • $25 (Scarcity of Demand) Interactive Chart

  12. Supply • Who supplies cars to dealers? • Who supplies parts to the car companies? • Who supplies the materials to the car companies? • Supply = Amount of quantity produced

  13. Demand • Who are the demand for cars? • Who are the demand for parts & supplies? • Who are the demand for materials? • Demand = Amount of quantity desired

  14. Equilibrium Point • WHERE SUPPLY MEETS DEMAND S D

  15. Scarcity • Definition of SCARCITY • Having unlimited wants but limited resources • Because of scarcity, various economic decisions must be made to allocate resources efficiently. • World War II • The United States accounted for 80% of world production of automobiles before the war. • During the war, total world production dropped to 20%.

  16. Competition • Do you think it would be a good idea to promote Cadillac in large European countries? • How come GM did not introduce an electric/hybrid in the 90’s to compete with Toyota? • Should we consider a car’s name when marketing it to other countries?

  17. 1.4 Role of Government • What roles does Government play in the purchase of a car? • What roles does Government play after the purchase of a car?

  18. Roles of Government • Purchase • Ensure banks are responsible when lending • Make sure you are told the truth • You get what you paid for Post Purchase • If the car has a safety defect the manufacturer must notify you • Insured & Licensed

  19. Minimum Wage • Consumer • Producer • Worker • Investors

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