Economics Coursework †Demand Essay

Manufacturers and dealers want UK to keep comp all Europe into scheme to give cash to drivers who scrap erstwhile(a) political machines to acquire sassyThe presidential term was facing re brand- spick-and-spaned pleas to bail out Britains ailing drive industry yesterday as figures showed gross sales of impertinent cars had swing outped by almost a third year on year. provided 313,912 cars were registered in March a 30.5% conciliate in sales from this m last year, figures from the Society of Motor Manufacturers and Traders (SMMT) showed, prompting fresh calls for the government to wage motorists to trade in their old cars for new ones.The motor industry and merelytonhole groups be hoping this months budget exit include a scrappage scheme, under which car owners are disposed(p) a financial inducing of about 2,000 to swap their old vehicle for a new greener model. treasury officials dedicate told the industry they are seriously considering including such a stimulan t drug in the budget a fortnight tomorrow although ministers publicly aver that no decision has been taken.A scrappage scheme in Ger galore(postnominal) which offers car owners 2,500 (2,263) for acquire rid of any vehicle over nine years old has attracted more than half a m disturbedion buyers, with sales soaring 40% there in March.The SMMT estimates that 280,000 Britons would take advantage of a similar political program over an 18-month period. This would cost around 560m, a figure the SMMT told the Guardian would take a net cost of 150-160m. The rest of the money would come from the tubful charged on new cars. that green groups counselled against such a knee jerk response and secern the money could be make better used to fund sustain able transport solutions. Some environmental organisations reverence funds could be diverted from existing pots of money set divagation by the government for investment in green technologies, such as the 400m earmarked in the pre-budget r eport for an environmental transformation fund, which supports the development of new low-carbon energy and energy efficiency technologies in the UK.Pro-motoring lobbyists argue that if the government does not move quickly to pass on the industry, further jobs would be lost and about manufacturers may transfer their business to other countries.In Whitehall, the debate is good-tempered swirling over the wisdom of adopting a scrappage scheme. Lord Mandelson, the business secretary, express in February that his department was examining the experience of other countries, notably Germany, to see whether it would work in Britain and carmakers were asked to produce costed proposals, but no decision has been made.David Cameron told the Guardian in January that the Tories were flavour at the idea but he was yet to be convinced.In the meantime, conduct for cars has crashed across the world, throwing the global industry into its biggest crisis and forcing American giants General Motors a nd Chrysler to the threshold of bankruptcy. Manufacturers in the UK have also been hit, with factories such as Hondas fructify at Swindon mothballed and thousands of jobs cut.Last months decline in sales follows extractions of 30.9% in January 2009 and 21.9% in February. March, when new number plates are issued, is a key period for the industry and traditionally accounts for nearly a fifth part of yearly sales. If things do not improve, the SMMT is forecasting that only 1.72m new vehicles provide be sold in 2009, compared with 2.13m in 2008.However, there was one splendid note with the rise of the small car segment, where sales increased 84%, indicating a trend towards downsizing among consumers. The top three best-selling models were the get across Fiesta, Vauxhall Corsa and Ford Focus.Yesterday SMMT chief executive, Paul Everitt, said March new-car registrations are a barometer of confidence in the economy, from businesses and consumers alike. The fall in the market shows th at the government needs to do more to boost confidence.A scrappage scheme allow for provide the incentive needed and the evidence is clear that schemes already utilise across Europe do work to increase posit. The UK is the only study European market not to implement a scheme.Edmund King, the president of the AA, said The latest figures show the stark difference between a farming with a scrappage scheme and one without. A vehicle-scrappage scheme has the potential to bring down emissions, reduce accidents and their severity whilst giving a boost to the UK motor industry. at that place are many benefits from getting older gross polluters off the road.But green groups counselled against introducing such a scheme. Peter Lipman, policy director at Sustrans, the sustainable transport charity, said it would be a really, really sad idea, wherever the money is overture from. There are so many better ways of kick the bucketing government money if you are try to deal with both the recess and climate change, he added.The RAC motoring strategist, Adrian Tink, said The introduction of any car-scrappage scheme needs to be contingent on balancing the economic benefits with a concern for the environment. The scheme needs to be as overmuch about getting old, high-polluting cars off the road as it is about stimulating car sales.The dire sales figures bode ill for the economic recovery because new car sales are seen as a key indicator of consumer confidence.When the UK went into quoin in the early 1990s, new car registrations dropped for 27 successive months. At one point, sales that had reached an annual peak of 2.3million in the late-1980s dipped as low as 1.5million.IB political economy Internal Assessment CommentaryCar industry begs for budget boost from Alistair darlingThe expression Car industry begs for budget boost from Alistair Darling found on the web page of The Guardian discusses the effects of the topical recession on the car industry, particularly i n the UK. The article states fit in to the SMMT a 30 % fall in sales from the year in advance at the same time. In order to take a start step to solving the problem the motor industry hopes to impose the scrappage scheme..The drop of direct for cars during the recession creates an example of the laws of demand and communicate. Demand is the measure of a good or a service that consumers are ordaining and able to purchase at a given price in a given time period. Supply is the willingness and ability of producers to produce a measuring of a good or service at a given price in a given time period.Consumers being witting of the recession will rather save their money than choose to spend it on luxury purchase. The fall in income due to the recession has, match to the laws of affix and demand and assuming that all other things stay competent (Ceterus Paribus), caused the fall of demand.Although the article doesnt state a percentage of the fall in income of the population, the in come elasticity of demand for vehicles can be described as at least unitary if not elastic, the examples will make an campaign to prove this.Income elasticity of demand measures the proportionate response of quantity demanded to a proportionate change in income.The article gives two proves for that First, the thought of the coming recession has already let people stop buying cars by 30.5% from one year to the other. People wont buy any luxury goods in bad times. And second, subsidising car buyers by about 2000 (scrappage scheme) will increase the purchases in a month by 40%.The fall in demand will also cause an excess yield even if the motor industry stops ware directly. All car producers will hence have a massive amount of cars that are just not being bought because there is no demand. check to the rules of supply and demand, as demand falls, quantity supplied decreases as well. In this particular case, the quantity supplied decreases as well but probably not as much as it coul d to find a new equilibrium, the price at which supply equals demand. Why this is the case will be explained after the succeeding(a)The following graph will show how a fall in demand will cause the demand curve to shift to the left and indeed a fall in the quantity supplied of cars to find a new equilibrium. It can be seen that cars sales fell by nearly 25 % from 2008 to 2009As declared above, this development is not quite that what happens in reality. According to the rules of unemployment, unemployment is a lagging factor and the demand for labour depends on the demand for, in this case, cars. That means that it begins to rise some time after the recession began. This is because of several reasons such as that firms want to keep skilled workers and will delay redundancies hoping that things might get better. Since firms want to keep skilled workers they would have to keep up the production to a certain extend. Of course production will decrease what will cause cyclical employmen t but to a certain extend production will be unbroken up to occupy the workers.The term cyclical unemployment can be delimit as occurring when the economy is growing more slowly than estimated as the demand for labour is interdependent on the demand for goods and services.This situation cant be kept up for long because firms lose money expending more money on workers they try to keep than actually gaining by sales and go bankrupt if the recession doesnt end or if they are not being subsidized by the government.Hence the motor industry searches for ways of pushing demand. A possible solution could be the scrappage scheme which encourages motorists to swap their old cars against new ones by giving the buyer about 2000 directly.The effect of the scheme on the demand for cars can be seen on the following diagramDemand rises again due to the encouragement and shifts the demand curve to the right again.Concluding one can say that the law of supply and demand is displayed in the real world. In the article Car industry begs for budget boost from Alistair darling it is clearly shown how recession can affect the demand for cars and how therefore demand for labour interdepends on demand for, in this case, cars. Furthermore it can also be stated that things like the scrappage scheme can encourage demand again.