eco4 - This report is to present the basic economy theory...

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This report is to present the basic economy theory about demand-supply curve and relative factors effecting the curve. Patterns and key factors of perfect, monopoly and oligopoly market are separately discussed. The UK automobile industry and UK economy are analyzed in detail. The BMW group’ analysis and data generates another part of the background information. Under the oligopoly market of the UK automobile industry, BMW and main competitors’ position and trends are introduced. BMW’s market position, share, competitive advantage and company strategy and their influence / impact to the Demand Supply Curve is discussed, which is supported by using all the internal and external factors of the BMW car-manufacturing. Certain conditions are assumed for the BMW Demand Supply Curve in UK market in 1999. Furthermore, the relationship between the demand and supply curves, key points and BMW exact supply and demand curve are compared and created to further practice the application of demand and supply curves. The trends of the whole UK automobile market and the shift of BMW’s demand supply curve are analyzed. Alternatives on withdraw the UK market (Rover division) or keep developing on current market are given according the analysis. Various recommendations to maintain BMW market position in UK market and the feasibility among each items are stated at the end. Page 1 of 24
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1. Basic economic theory: 1.1 The Demand Curve: A demand schedule is an estimate of demand for a good per time period (per day, per month etc.) at any given price level. A demand curve is a graph of a demand schedule, with price on the y axia and quantity demanded on the x axis. It is intuitively obvious that the higher the price charged for a product, the less will be sold, other things being equal. This is the basis for the economic concept of the demand curve. A typical demand curve is shown in Exhibition 1, slopes downwards from the left to the right. Together with the quantities which would be purchased at two prices P1 and P2. If the quantity changes by a large relative amount when price is changed, the demand curve is said to be "elastic", and if the quantity is not affected much by changes in price it is said to be "inelastic" (The elasticity concept can be expressed mathematically, but here we concentrate on the general meaning of the idea). In the Diagram the price fell by half from P1 to P2, while the quantity bought increased by about three times from Q1 to Q3. This demand curve is therefore elastic in the range Q1 to Q3. Exhibition 1 Factors influencing demand: The price of the good; The price and availability of substitute goods; The price and availability of complements; The size of household income; Tastes, fashions, attitudes towards a good; Consumer expectations about future market conditions; The distribution of income among the population.
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