Question

Explain the concept of demand curve and the determinants/factors that can influence the demand of a product/service, using concepts from Block 5, Reading 40. Using these concepts, and the information from the case study, explain and discuss the determinants/factors that are affecting the demand for Tesla cars.

Answer 1

The demand curve is Concept in which it shows graphical representation of the relationship between the price of a good or service and the quantity demanded for a given period of time. the price will appear on the left vertical axis, the quantity demanded on the horizontal axis.

In this graphical representation, The demand curve will move downward from the left to the right, which expresses the law of demand — as the price of a given commodity increases, the quantity demanded decreases, all else being equal.

For example, if the price of corn rises, consumers will have an incentive to buy less corn and substitute it for other foods, so the total quantity of corn consumers demand will fall.

the exception to demand curve is a Giffen good. This is one that is considered a staple food, like bread or rice, for which there is no viable substitute. In short, the demand will increase for a Giffen good when the price increases, and it will fall when the prices drops. The demand for these goods are on an upward-slope, which goes against the laws of demand.

The factors or determinants that affect demand for a product/service are Prices of goods/services,Consumer's income, Price of related products or services, Consumer's taste or preference.these are some factors which can lead to changes in demand for a product or services.

If we apply this to Tesla's product or services.

Tesla is known for selling electric Cars models .It has three electric car models.In this case, we can see how Tesla is trying to reduce prices of its cars because it wants to clear its stock out So if Tesla decreases the price of its electric cars then the demand for its Cars will increase. The price is very important factor when a buyer consider. Tesla must make sure that its price reduction is effective and prefered by customers and outrun competition.

Consumer's income is very important factor because when they have high income level then their purchasing power increases. This will be in favor of Tesla because high income level means, consumers will afford its cars and show high demand for tesla cars.

Price of related goods or services is also a factor in which if there are cheaper substitute products like public transport, Metro,Cab services then it affect demand of Tesla cars because customer may want to use such subtitutes.

Consumer's taste also affect demand because if customer have taste in purchasing cars from big brand also want to drive electrics cars then demand for tesla electric cars will increase. but if customer have no taste to drive electric car and stay on fuel based cars then demand will decrease.

Answer 2

The Aggregate Demand curve is characterized as downward-sloping mainly because of the law of diminishing returns on marginal utility and income-substitution effect.

Here the demand is perturbed by political, technological, environmental, economic, and socio-cultural factors.

The demand for Tesla cars here is subdued due to inflated costs, lower tax credits, delayed inventories, shifts to electric vehicles, customers' right-hand drove preferences and logistical issues.