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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 - PowerPoint PPT Presentation
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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◦Not For Profit
◦Sole Proprietorship (70%)◦Partnership (10%)◦Corporation (20%)
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.
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?
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)
EntrepreneurshipEntrepreneurship 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
1.2 Competitive MarketsMore 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)
CompetitionState
GM - Billy Durant - 1908 (MI)Ford - Henry Ford - 1903 (MI)Chrysler - Walter Chrysler - 1925 (MI)
National
Tesla - Elon Musk, Martin Eberhard - 2003 (CA)Fisker - Henrik Fisker - 2007 (CA)
International
Toyota - 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)
Pricing & IncentivesCan Price be an incentive?
Incentives entice people to buy Lower interest rate on a loan Free/cheap upgrades
1.3 Prices, Supply, & DemandWHO WANTS CANDY
◦Free (Scarcity of Supply)◦$.25 (Equilibrium Point)◦$25 (Scarcity of Demand)
Interactive Chart
SupplyWho supplies cars to dealers?Who supplies parts to the car
companies?Who supplies the materials to the
car companies?
Supply = Amount of quantity produced
DemandWho are the demand for cars?Who are the demand for parts &
supplies?Who are the demand for
materials?
Demand = Amount of quantity desired
Equilibrium PointWHERE SUPPLY MEETS DEMAND
S
D
ScarcityDefinition 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%.
CompetitionDo 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?
1.4 Role of GovernmentWhat roles does Government
play in the purchase of a car?
What roles does Government play after the purchase of a car?
Roles of GovernmentPurchase
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
Minimum WageConsumer
Producer
Worker
Investors
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