Activity 2n: The market for new and used cars
- 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).
- 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).
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5. Since 2022, the price of used cars has fallen as there has been an increase in new cars on markets owing to the increased availability of a key input and an effective fall in the costs of producing new cars. This increased the availability of a substitute (new cars) for consumers, which resulted in a fall in the demand for, and price of, used cars.
6. Higher prices for petrol and diesel has a resulted in a lower relative of alternative/substitute fuel sources for non-internal combustion vehicles, such as electric cars. This has resulted in an increased demand for electric vehicles and a corresponding increase in the allocation of resources to their production as electric vehicle manufacturers respond to higher demand, prices and profits.