Each and every product in the firm has supply and demand of its own. This determines the price of the product unless it is a controlled product, or it is a monopoly market system. The analysis of demand and supply of every firm is necessary for decision making, especially concerning production decisions. The increase in the supply of a product will reflect on the rise in the price of the commodities. On the other hand, the company should make a production decision that will enable the firm to meet the demand of the market. The aim of the paper is to analyze the demand and supply of the Ford Motor Company. Also, it will examine the elasticity of the firm’s product. Ford Motor company is a Motor company that manufactures high-end automobiles. It has been recording some of the highest sales in the United States. The company has recently recorded high sales since it has large market share compared to its rivals. It is a global company with a good supply chain that assists it in marketing its products. The main brands of Ford Company that have highest demands are the Ford and Lincoln.
Ford has been the best company regarding sales in the US for a considerate period after the General Motors of United States of America. However, its demand has been increasing. The conclusion can be deduced from the sales date of the company available from the year 2014 to 2016, a period of 3 years. Considering the three years, 2016 has the highest demand of 216,045. The sales of the product were as at February 2016. This was followed by the number of the cars sold in 2016 that was 179,673. The demand of 2014 was 152,345 which was the lowest among the demand for the company’s products.
The real-time price elasticity of automobiles (2007)
Using the information available in the graph, there are decisions that the company can make regarding the demand and supply of their products. The first action is that the firm should be able to produce motor cars that can meet the demand of the product in the coming years. In case the company is unable to produce the required number of items, it should increase the price of their commodities to reduce the demand. The data about pricing of these commodities can be used to calculate the price elasticity of the demand.
Price elasticity of demand is a relationship that measures the change in demand for the product in relation to the change in price. The pricing of the Ford products has been increasing each year. However, the demand for the product increases as the demand increases. The type of demand shown here is inelastic demand. The reason it is inelastic is because the change in price is accompanied by a small change in demand because it deals with luxury models of vehicles.
There are many factors which affect the responsiveness of the demand to prices changes of Ford. The main factor that affects is the type of the product that the company produces. The company deals with the luxurious vehicles. Therefore, an increase in the price of these products leads to increase in demand for the same product. The other factor that impacts is the prices of the substitutes on the market. If the prices of other products are high in the market, change in the price of the minor product will not make the customer switch to the more expensive product. The competitors of Ford manufacture cars of higher process such as Mercedes and Lamborghini. The elasticity of demand of Ford affects its pricing in different ways.
The pricing of the Ford products is highly affected by the elasticity of demand for many products. An increase in the price of the products leads to increased sales due to the application of inelastic elasticity. Therefore, this can be a valuable decision-making tool. If a company wants to make more sales, it will increase the price of the commodity. Alternatively, lowering the price of the Ford products will lead to a contraction in the demand for their products because the customers will associate them with inferiority. Thus, when making the decision to increase the revenue of the company, the price of products should be increased to increase the sales. Increase in price and sales is important because this is the reason that can make the company record a high revenue generation (Wee& Wu, 2009).
References
H, Wee., & Wu, S. (2009). Lean supply chain and its effect on product cost and quality: a case study on Ford company. Supply chain management: an international journal, 335-341.
Mark, L. (2007). The real-time price elasticity of automobiles. Automobiles economics, 249-258.
Patrick, A. (2011). Price elasticity of demand. Mackinac Center for public policy, 13.
Ronald, C. (2010). The nature of the firm: origin. Journal of law, economics, & Organization, 3-17.
