micro economics
TRANSCRIPT
Micro Economics and Its Applications
Presented by Harihar Pathy, Ravi Kumar, KNV Chinna Rao and Rabi Narayan Mishra
Study on Indian Automobile
Industry
Micro Economics – Objectives of the Presentation
To study application of Micro Economics in Real World Situations
Oligopolistic Automobile Sector Factors affecting Two Wheeler Sector Elasticity of Demand with respect to Automobile Industry Economic Factors attributable to decline of General Motors
in USA
Micro Economics – Definition Definition : Economics is the study of allocation of scare
resources and problems arising directly and indirectly due to scarce resources.
Deals with demand and supply of goods and services Effect of demand and supply with respect to change in
price, change in income etc Elasticity of demand Development of markets
Automobiles Industry
Segmentation of Automobile Industries
Heavy Vehicles ( Truck, Buses, Trucks etc)
Light commercial vehicles
Passenger vehicles ( Cars, Two wheelers)
Break Up of Indian Automobile Industry
76.49
3.60
3.95
15.96
% Share of Indian Automobile 2008-09
Two wheelerThree wheelerCommercial vehiclesPassenger vehicles
Two Wheeler Industry
Nature of Two Wheeler Industry Total size of the industry – Rs. 288 million Total volume 80 million units
Industry dominated by Hero Honda Bajaj Auto TVS Motors
Segmentation of Industry Motor cycle – 80% Scooters – 15% Mopeds – 5% Yamaha - Insignificant Suzuki - Insignificant
Market Break Up of Two Wheeler Industry
Nature of two wheeler Industry
Hero HondaBajaj
TVSYamaha
SuzukiKinetic Honda
0
10
20
30
40
50
Motor cycleScooter
Two Wheelers - Market Share
22
105
5
18
29
43
% Market Share
EnfieldKinetic MotortsHondaSuzukiYamahaTVSBajajHero Honda
Two Wheelers – Market Type
From the above figure it can be seen that more than 80% market share is by three companies i.e. Hero Honda, Bajaj and TVS
Therefore two wheeler industry can be considered as Oligopoly market.
It is seen that few market players viz. Hero Honda, Bajaj and TVS have virtually forcing other players viz. Yamaha, LML, Kinetic etc. out of the market
Two Wheelers – Income Criteria
2005-06 2006-07 2007-08 2008-09
0
1
2
3
4
5
6
7
8
9
10
Disposable Income US $ Million
Income
Two Wheelers – Supply & Demand
2004-052005-06
2006-072007-08
0
10
20
30
40
50
60
70
80
90
ProductionSold
Two Wheelers – Elasticity of Demand
It is observed from the above graph that the production as well as Consumption increased from year to year
Selling of two wheeler is dependant on the disposable income of individual.
Hence, with increase in income the demand of two wheeler has increased, which shows the income elasticity of demand for Luxurious goods.
Micro Economics - General Motors – Case Study
GM was the no. 1 car maker of USA before 2008 Toyota entered into USA market with cheaper new vehicles
with fuel efficiency People shifted to purchase Toyota GM continued producing cars which are fuel in-efficient and
costly Once-popular GM automobiles declined slowly and
continually as Toyota and other Japanese cars won ever increasing share of the automobile market
The number of units manufactured for each of the brands of GM viz. Buick, Cadillac, Chevrolet, GMC, Hummer, Pontiac, Saab and Saturn represented too much output
This situation resulted in the marginal revenue becoming less than the marginal costs thereby resulting in loss for the company.
Micro Economics - Conclusion
Micro Economics plays a vital role in the performance of the economy particularly to individual firms.
In the case study above, we could analyse about Demand & Supply Income Elasticity of Demand Market Structure of Automobile Industry Effect of Marginal Cost & Marginal Revenue in the
case of General Motors in the process of Profit Maximisation.