Draft- MBS686 Economics and Business Strategy

Economic theories explain the choices and actions of economic concept such as

producers, the government, and consumers. Market structure and welfare economics are two

areas where real-world economic concepts are used. Scarcity, supply and demand, incentives,

trade-offs, opportunity costs, economic models, factors that influence production,

manufacturing possibilities, marginal analysis, cyclical flow, and international trade are a few

of the economic concepts that can be used for this case study analysis.

Following a number of price reductions in Asia, Tesla reduced prices across the US,

Europe, the Mideast, and Africa. Analysts viewed this move as a direct jab at both its smaller

counterparts who have been bleeding cash and the traditional car makers who are hurriedly

ramping increase their production of electric vehicles. The decision represents a shift in the

automaker's strategy from the previous two years, when the demand for new vehicles

outstripped the supply. It happens after CEO Elon Musk forewarned that it would decrease

prices to continue growth at the expense of profit due to the possibility of a recession and

higher interest rates.

In a market, supply and demand are balanced by the price mechanism. If buyers desire

to purchase more of a particular good than is available at the existing rate, they will often bid

the value that is greater. If suppliers desire to sell less than what is being offered at the going

rate, they will cut their prices. As a result, the price system determines how much of a good

will be supplied. The way goods are produced and dispersed, or how they are shared, is also

determined by the price system. The most expense vehicle categories must be given priority

for electrification in developing and emerging economies. The economic case for

electrification may be supported by both price signals and the availability of charging

infrastructure.