Economic analysis for managers assignment 1

Nitheesh N | 16mba0017

Price Elasticity of Supply of Cars in India

The price elasticity of supply is the percentage change in quantity supplied of a good
resulting from a 1-percent increase/decrease in its price.
Price elasticity of Supply=

Qs
P

%Qs Percentage Change in Quantity Supplied

%P Percentage Change in Price
To find the price elasticity of 20 car models in India in the years 2014 and 2015. The percentage
change in quantity supplied is given.
Find the percentage change in price:

P=

P 2P 1
100
P1

P2 Price of car in 2015

P1 - Price of car in 2014

Make
Maruti
Maruti
Maruti
Maruti
Maruti
Maruti

Model
Alto
Dzire
Swift
Wagon
R
Baleno
Celerio

Maruti
Maruti
Maruti

Omni
Ertiga
Ciaz

Maruti
Hyunda
i
Hyunda
i

Eeco
i10
Grand
Elite
i20

Price Elasticity of Cars in India (2014-2015)

Price
Qs in
Price in
in
2015
2014*
2015
Segm
%
P1(in
P2 (in
ent
(Q2)
Q
Lakhs)
Lakhs)
%P
A
21462 -6.2
2.68
3.01 12.3134
C1
17587 -10
5.1
5.14
0.7843
B2
14057 -29
4.5
4.9
8.8888
B1
B2
B1

12744
7698
7141

-0.9
0
48

4.1
Nil
4.28

4.69
7.47
4.5

Utility
Utility
C2

5901
5799
5431

2.7
6
8.5

2.34
6.18
10.19

Utility

4611

3.6

B2

9934

-1.8
-3.9
-9.6
12.
4
13.
9

B2

9604

0.7

Price
Elasticity
Ep
0.5035
12.75
3.2062
0.0625
Nil
9.3381

3.2

14.3902
Nil
5.1401
13.3333
3
19.8823
11.1111

5.72

14.4

0.9652

6.5

7.6923

0.091

0.135
1.3
0.4828
1.116

Hyunda
i
Hyunda
i
Honda
Honda
Mahind
ra
Mahind
ra
Mahind
ra
Renault

Creta

C2

6589

Nil

8.59

Nil

Nil

Eon
City
Jazz

A
C2
B2

5431
8037
4709

-20
4.8
0

3.4
8
Nil

3.69
8.2
5.3

8.5294
2.5
Nil

2.3917
1.92
Nil

Bolero

Utility

6160

-28

6.12

6.6

7.8431

3.5317

Scorpio
TUV30
0
Kwid

C2

4013

-20

8.6

13.7

59.3023

0.3321

C2
A

3816
5985

0
0

Nil
Nil

7.37
2.56

Nil
Nil

Nil
Nil

*Cars with Price in 2014(P1) as Nil are new cars launched in 2015 and hence cannot
calculate the elasticity.
Analysis:
Elasticity can be classified into 5 categories based on the value of price elasticity.
1. Perfectly Elastic Ep =
2. Relatively Elastic Ep > 1
3. Unitary Elastic Ep = 1
4. Relatively Inelastic Ep < 1
5. Perfectly Inelastic Ep = 0
So the elasticity of the car models can be defined as follows:
Model
Alto
Dzire
Swift
WagonR
Baleno
Celerio
Omni
Ertiga
Ciaz
Eeco
i10 Grand
Elite i20
Creta
Eon
City
Jazz
Bolero

Elasticity
Relatively Inelastic
Relatively Elastic
Relatively Elastic
Relatively Inelastic
Nil
Relatively Elastic
Relatively Elastic
Relatively Elastic
Relatively Inelastic
Relatively Elastic
Relatively Elastic
Relatively Elastic
Nil
Relatively Elastic
Relatively Elastic
Nil
Relatively Elastic

Scorpio
TUV300
Kwid

Relatively Inelastic
Nil
Nil

*Cars with Elasticity as Nil are new cars launched in 2015 and hence cannot calculate the
elasticity.

From the below graph we can find out the cars with maximum and minimum price elasticities
(Assuming the elasticities of the new cars in the market need not be considered).

Car with maximum price elasticity is Celerio with Ep = 9.3381.

Car with minimum price elasticity is WagonR with Ep = 0.0625.

Price Elasticity of Cars

14.000
12.000
10.000
8.000

Price Elasticity Ep

6.000
4.000
2.000
0.000

Car Models

Graph: Price Elasticity of Cars