STUDENT HANDOUT
CHAPTER 2. MARKET FORCES OF SUPPLY & DEMAND
Topic: What determines the purchase of an automobile?
You are required to write a brief analysis or prepare a group presentation applying the
determinants of demand to the modern car market.
To achieve a high assessment, your analysis must correctly utilize the following
concepts:
A. Demand shifters

Income: Is a car a Normal Good or an Inferior Good? How does a recession
affect the demand for luxury SUVs vs. used economy cars?

Prices of related goods:
o
Substitutes: How do rising prices for ride-sharing (Grab/Uber) or
improved public transit affect car sales?
o
Complements: Analyze the impact of gasoline prices or the availability
of EV charging stations on car demand.

Tastes and preferences: Discuss the shift toward "Green Consumption"
(Electric Vehicles) or the preference for safety features over engine power.

Expectations: If consumers expect a 0% registration tax policy to start next
month, what happens to current demand?
B. The role of credit (interest rates)
Most automobiles are purchased via financing. Explain how a change in the Central
Bank's interest rates acts as a "cost of borrowing," effectively shifting the demand curve
even if the manufacturer's price remains the same.
---"Economics is everywhere!"