The Influence in Demand and Supply of Imported Cars and Local Cars

Malaysian loves imported cars. But they are also think about their income. The people who are studying  economics will know this concept, wants are the unlimited desires or wishes that people have for goods and services. Demand is the quantity of a good or service that consumers are willing to buy at a given price. The quantity demanded of a good or service is the amount that consumers plan to buy during a given time period at a particular price.

Recently, Malaysian loves imported cars like Maruti, BMW, Benz, Hyundai and more. But, if the price of the imported cars increase, definitely the quantity demanded of it will decrease. This might lead to an increase in quantity demanded of local cars like Perodua or Proton. For example, there’s an imported cars company, Maruti, has increase prices of all its models. By increasing the price, income effect and substitute effect will occurs. Due to price of imported cars, the income of people did not increase, that is why people will not purchase imported cars. The purchasing power will drop. Besides that, there is substitution effect on imported cars, since people change their decision to buy local cars. The demand of imported cars decrease, then the demand of local cars will increase. Although the price of the imported cars increases, but there are some people who have higher income are still able to follow their own desire to buy imported cars.

Besides that, competitor is a rivalry of two or more businesses that target the same customer. In reality, local cars more concerns about imported cars as imported cars having a higher demand than local cars. Mean while, due to price of imported cars increase and price of local cars remain the same, local cars have become the competitor to the imported cars. People tend to buy more on local cars than imported cars. One of the reasons that imported cars are having the same quantity and function become its price increase. There are also some of the local cars could be compare to some of the imported cars by function and features.

Moreover, the elasticity of demand is a units-free measure of the responsiveness of the quantity demanded of a good to a change in its price when all other influences on buying plans remain the same. Imported cars are having elastic demand to the people. This is become people’s demand affected by the price of the imported cars. People are still buy imported cars which it’s price is increases because some of the quantity rather than the price. So the demand is not perfectly elastic.

A supply is more than just having the resources and the technology to produce something. Supply is the quantity of a product that a producer is willing to supply onto the market at a given price. The quantity supplied of a good or service is the amount that producers plan to sell during a given time period at a particular price.

The law of supply shows that if the price product increases, the quantity supply will increase. If the price of product decreases, the quantity supply will decrease. This is because the price of product increases will cause the supplier increase the maximum profit of the product. Suppliers never want to decrease the price that supplier willing to accept. There are several factors can affected the change in supply. The most common factor is price of production, as the factors of production that used to manufacture a product increase and the supply will decrease.

As I said just now, the price of imported cars increase, people will change to buy local cars, so the demand of imported cars will decrease. The supply of imported cars also decreases. It is because people are looking for the local cars, so that the supply of imported cars will decrease. For example, the company, Maruti, has increase price of all its models. The price of imported cars increase, people cannot handle such a higher price, so that, they will not purchase imported cars. The demand of imported cars decrease, it will influence the supply decrease as well. Otherwise, the price of imported cars increase, people are buying local cars, so the supply of the local cars will increase. The producers of local cars will produce more products.

In the conclusion, if the price of the imported cars increases, the demand of it will decrease. This will lead to an increase in quantity demanded of local cars. I personally believe that if the price of imported cars keeps on increasing, the demand of our local cars will also increase a lot, and this can bring our country a better economy.

Serene Phua Sweet Ling