Activity 2(n)

Activity 2n: The market for cars

  1. Some of the demand factors include changes in tastes and preferences (e.g. preferences away from using public transport); the price and availability of substitutes (e.g. the increased demand for second hand cars occurring because of higher new car prices and delays in orders being filled); extremely low interest rates (making it more affordable to finance the purchase of a new car via debt) and the Government stimulus payments during the pandemic which boosted household disposable income (making it more affordable to purchase a vehicle).
  2. Some of the Supply factors include the disruptions to global supply chains (e.g. parts from China becoming unavailable and the global chip shortage); the increased cost of shipping; the higher costs of crude oil (which is a input in production); and the depreciation of the Australian dollar (increasing the cost to import cars).

4. Since the article was written, the prices of second-hand cars remain high, but they are starting to come down as the wait times for new cars is becoming smaller.  The reduction in second-hand car prices will continue as the supply constraints affecting new cars diminishes over time.

5. Individual student research required.