assist me with the following: The quantity demanded (Qd) represents how many units of a product consumers are willing and able to buy at a particular price, during a given time period.
In economics, demand is expressed using the following general formula (from the slides, p.299):
Qd,x=Qd,x(P,Y,P1,P2,…,PN,T,A)Q_{d,x} = Q_{d,x}(P, Y, P_1, P_2, …, P_N, T, A)Qd,x=Qd,x(P,Y,P1,P2,…,PN,T,A)
Where:
• P = Price of the product (e.g. price of the Joule car)
• Y = Consumer income
• P₁, P₂, …, Pₙ = Prices of other related goods (e.g. petrol cars, hybrid cars)
• T = Consumer tastes and preferences
• A = Advertising or awareness of the product
Application to the Joule Electric Car
In the case of the Joule, the demand depends on both economic and social factors.
1. Price (P):
o As the selling price increases, fewer people can afford the vehicle, so demand decreases.
o To increase demand, Optimal Energy would need to keep the price competitive compared to petrol cars and imported EVs.
2. Income (Y):
o The higher the average household income, the greater the ability of customers to purchase electric cars.
o In South Africa, only middle- to high-income groups could initially afford EVs, which limits total demand.
3. Substitute Prices (P₁…Pₙ):
o Petrol vehicle prices and fuel costs influence EV demand.
o When petrol prices rise, customers are more likely to switch to electric cars, increasing the demand for the Joule.
4. Tastes and Preferences (T):
o Growing environmental awareness and government incentives encourage more people to choose electric vehicles.
5. Advertising (A):
o Effective advertising and public education about the benefits of the Joule (low running cost, zero emissions) can significantly raise consumer interest and demand.
Conclusion for Qd
For Optimal Energy, demand forecasting must consider both market and behavioural factors. If income levels rise, fuel prices remain high, and advertising improves, the quantity demanded (Qd) will increase even if the car’s price (P) stays constant.
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2.2 Quantity Supplied (15 marks)
The quantity supplied (Qs) represents how many units producers are willing and able to manufacture and sell at a certain price.
The general supply function from the slides (p.300) is:
Qs,x=Qs,x(Px,P1,…,Pn,Fx,F1,…,Fm,T,Z)Q_{s,x} = Q_{s,x}(P_x, P_1, …, P_n, F_x, F_1, …, F_m, T, Z)Qs,x=Qs,x(Px,P1,…,Pn,Fx,F1,…,Fm,T,Z)
Where:
• Pₓ = Price of the product (e.g. the Joule car selling price)
• P₁…Pₙ = Prices of related goods (other car models the company might make)
• Fₓ, F₁…Fₘ = Costs of inputs such as labour, materials, batteries, and energy
• T = Level of technology used in production
• Z = External factors such as taxes, government policies, and incentives
Application to the Joule Electric Car
1. Product Price (Pₓ):
o If the market price of the Joule is high, Optimal Energy will be motivated to produce more units because profits per car increase.
