• Join over 1.2 million students every month
  • Accelerate your learning by 29%
  • Unlimited access from just £6.99 per month

Economics commentary. The article talks about the launching of the cheapest car ($2500 U.S only) in the world by Tata Motors, by the name Nano. In this commentary I will analyze its effects on demand[1], supply[2], externalities[3] and price[4].

Extracts from this document...


Name: Vishal Bharam Commentary number: #1 Due Date: February 1, 2008 Source: Unknown author, (January 12, 2008), No lakh of daring, The Economist Section: 2, Microeconomics Word count: 747 The article talks about the launching of the cheapest car ($2500 U.S only) in the world by Tata Motors, by the name "Nano". In this commentary I will analyze its effects on demand1, supply2, externalities3 and price4. According to the law of demand5 ceteris paribus6, the launch of Nano in to the car market in India is expected to create a huge increase in demand because the lower middle class will start buying this car. An increase in demand will lead to a shift of the original demand curve7 (D) to the right (D') (refer figure 1). Nano market E The increase in demand will attract Tata (the producer8) ...read more.


The price of the Tata Nano being unique for cars makes it hard to decide what a substitute for this car is. Other car companies in India like Hyundai, Suzuki, Toyota and Chevrolet will suffer with the launch of "Nano" as the demand for their cars will decrease. In order to remain in the market, also called Buyers market12, these companies will reduce their current car prices and will try to introduce cheaper vehicles. This will lead to increase in its supply. The demand for two wheelers in India will decrease, as people will prefer buying "Tata Nano" by paying a little more. Petrol being the strongest compliment13 of cars will become extremely costly as the demand for it will increase but as supply is pretty much constant or it will decrease with time because petrol is a scarce fossil fuel. ...read more.


1 Amount people are prepared to buy under specific circumstances such as the products price 2 Amount that firms are prepared to sell under specified circumstances 3 Third party effects arising from production and/or consumption of goods 4 Value of a substance 5 Negative relationship between the price of a good and the quantity demanded 6 Everything else remaining the same 7 Willingness to pay 8 People who make and sell the good 9 Willingness to accept 10 Point where the demand and supply curve meets 11 People who buy the good 12 Consumer dominated market 13 Two goods related such that demand for one falls when the price of other increases 14Quantity demanded is very responsive to change in price 15 Sum of personal consumption expenditures, government purchases of goods and services, investment expenditures, and net exports 16 Expensive and luxurious goods which are bought by rich people ?? ?? ?? ?? ...read more.

The above preview is unformatted text

This student written piece of work is one of many that can be found in our International Baccalaureate Economics section.

Found what you're looking for?

  • Start learning 29% faster today
  • 150,000+ documents available
  • Just £6.99 a month

Not the one? Search for your essay title...
  • Join over 1.2 million students every month
  • Accelerate your learning by 29%
  • Unlimited access from just £6.99 per month

See related essaysSee related essays

Related International Baccalaureate Economics essays

  1. Economics Commentary Demand and Supply

    the supply of the product, do not apply in this situation as the quantity being supplied is being changed as a result of this fluctuation of crude prices. The prices began to plunge at alarming rates; therefore OPEC had decided to decrease production by 1.5 million barrels to decrease the rapid decline of oil prices.

  2. Economics Commentary

    There is one big benefit of having some sort of formal collusion or tacit collusion. That is the fact that you will avoid price wars. A price war is when rival companies try to "outprice" each other. They keep lowering their prices trying to be the cheapest company.

  1. Microeconomics Commentary

    The major determinants that affect PES of a good are time and availability of producer substitutes.

  2. Econ commentary. The article talks about inflation in China. The CPI rose 4.9% in ...

    In order to solve inflation, the central bank in China has said that "it has decided to use interest rates as a solution, by controlling excessive liquidity. It has raised benchmark interest rates three times since the start of last year."

  1. UK Car Scrappage Scheme. This essay will firstly display and show the effects of ...

    If there is a change in any factor other than price, that will cause a change in demand and also a shift of the curve because second hand cars are substitutes to new cars. Having said that, the government is offering �2000 pounds scrap money toward buying a new car.

  2. Essay on negative externalities

    If external costs of production are not reduced by government policies, it could lead to market failure which needs to be prevented The following actions can be taken to reduce these costs: 1) It could tax the firm in order to increase the firm's private costs and so shift the MPC curve upwards towards the point of social efficiency .

  1. Economics Article Commentary - The article deals with the raise of a tariff on ...

    Seeing the advantages for the U.S. producers, they appreciate the tariff, because the heavily subsidized Chinese solar panel economy otherwise would drive them out of business in the longrun, shown by Diagram 2. The Chinese producers gain market-share as S (domestic)

  2. Role of ICT for "Make in India" government initiative.

    Why Companies not manufacturing in India ? Labour laws are still not made conductive to the Make in India campaign. China is the major competitor when it comes to manufacturing and service business. Defunct logistic facilities is the major disadvantage for India to achieve the status as a manufacturing hub.

  • Over 160,000 pieces
    of student written work
  • Annotated by
    experienced teachers
  • Ideas and feedback to
    improve your own work