Chevrolet Corvette

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Chevrolet Corvette
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Group 17

• Erica Gray
• Zach Gray
• Nate Hopkins
• Mike Howley

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Corvettes Market

• Price starts at 44,000 for 2004 Corvette
• Largest market is middle aged men
• Buyers are in the upper middle class of the
  economy
• The Corvette is in an Oligopoly because the
  market composed of a few firms producing a
  homogeneous product

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Corvette History

• The Corvette was first designed in 1951
• It has gone through many makes and models not
  only in the body but in the engine
• The Corvette has been Chevrolets marquis sports
  car for a half century

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Factors Of Production

• Land
• Labor
• Capital
• Physical Capital
• Human Capital
• Entrepreneurial Activity

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Factors Of Production

• Land
• The physical space at which production takes
  place, as well as natural resources found under
  or on the firm.

• Corvette Land
• Car Dealerships
• Manufacturing Plants
• Aluminum, Coal, or other resources

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Factors of Production

• Corvette Labor
• Car Salesmen
• Factory Workers

• Labor
• The time human beings spend producing goods or
  services

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Factors of Production

• Capital
• Long lasting-tools people used to produce goods
  and services.
• Human Capital
• Skills and training for workers
• Physical Capital
• Buildings, material and Machinery

• Human Capital
• Skill for factory workers and Car Salesman
• Physical Capital
• Machinery and Tools used in factories

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Factors of Production

• Entrepreneurial Activity
• Recognizes opportunity and then takes advantage
  of that opportunity

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Supply

• Is a relationship showing the various amounts of
  an item that sellers are willing and able to make
  available for sale at various possible
  alternative prices, during a given period of
  time, Ceteris Paribus.
• Ceteris Paribus Factors for Supply
• 1. Input Prices
• 2. Prices of Alternative Goods
• 3. Technology
• 4. Number of Suppliers in the Market
• 5. Expectations of Sellers

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Supply

• When Corvette Raises the price of their cars, and
  all other factors remain constant, the quantity
  supplied of those goods will increase.

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Supply
Price

• Change in Quantity Supplied
• A Movement along a supply curve in response to a
  change in price.
• Price increase Rightward movement, increase in
  the Quantity Supplied.
• Price decrease Leftward movement, decrease in
  quantity supplied.

S
Quantity
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Supply

• Change in Supply
• A change in any Ceteris Paribus factor of supply,
  except price, causes a rightward or leftward
  shift.
• Sell more Corvettes -Rightward shift or an
  increase in supply
• Sell fewer Corvettes - Leftward shift or a
  decrease in supply

S3
Price
S1
S2
Quantity
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Demand

• The Law of Demand states
• Demand is the relationship between different
  amounts of an item which buyers are willing and
  able to purchase at various prices, during a
  given time period Ceteris Paribus

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Quantity Demanded
Price

• Inverse relationship between price and demand
• Graph will slope down to the right
• P D P D

• Inverse relationship between price and demand
• Graph will slope down to the right
• P D P D

Demand
Quantity
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Quantity Demanded
Price

• Movement along the demand curve occurs in
  response to a change in price
• When price increases, there will be a leftward
  movement along the demand curve
• When price decreases, there will be a rightward
  movement along the demand curve

D
Quantity
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Ceteris Paribus Factors for Demand

• Besides the price, there are other factors that
  influence how much of an item someone is willing
  and able to purchase at various prices during a
  given period of time
• What are these factors and why are they held
  constant?

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• Income
• Do you have enough to
• afford a Corvette?
• Prices of related goods
• Is there another sports car for less?
• Taste
• Are Corvettes appealing to you?
• Number of consumers
• Are there more people willing and able to buy
  Corvettes?
• Expectation of consumers
• Corvette receives high ratings will raise
  expectations

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• When any of the ceteris paribus factors change,
  the result is a shift of the entire demand curve

Price
Quantity
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Opportunity Cost

• The value of the next best alternative which must
  be given up in order to get something.
• The summation of explicit and implicit costs.

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Explicit and Implicit Costs

• Explicit CostsThe money actually paid for a
  choice.
• Implicit CostsThe value of something sacrificed
  when no direct payment is made returns to
  self-owned factors of production.

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Explicit and Implicit Costs

• Explicit Costs of Manufacturing a Corvette
• Salary paid to labor
• Expense to purchase supplies (inputs)
• Depreciation expense
• Property or rent expenses
• Taxes

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Explicit and Implicit Costs

• Implicit Costs of Manufacturing a Corvette
• The time and money that could be spent, saved, or
  earned on something else.
• Examples
• Money that could be earned working at a Mercedes
  dealership.
• Time that could be spent patenting a new idea.

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Explicit and Implicit Costs

• Explicit Costs of Owning a Corvette
• Payments made to purchase the vehicle
• Principle Cost Interest
• Insurance payments
• Gas and maintenance expenses

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Explicit and Implicit Costs

• Implicit Costs of Owning a Corvette
• Garage space
• Any other good or service that could have been
  purchased with money used to purchase Corvette

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Short Run

• Corvette employs an input in order to produce and
  output and earn a profit
• Short Run is the period in which some inputs are
  fixed
• In the short run, Corvette could produce more
  Corvettes by hiring more workers

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Long Run

• Long Run is the period in which all inputs are
  variable
• Corvette must decide what combination of inputs
  to use in producing any level of output
• In the long run, Corvette may increase their
  production by building a new plant

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Substitutes

• Any good that can be used in place of another
  good to fulfill the same purpose.
• Examples
• Mercedes-Benz sports cars
• BMW sports cars

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Substitutes

• A rise in the price of a substitute increases the
  demand for your good.

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Economies of Scale

• Lower ATC as Quantity increases

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Economies of Scale

• Specialization and division of labor with
  assembly lines increases output
• Corvette pays less for their raw materials than a
  smaller firm would

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Economies of Scale

• Large firm allows more money for research and
  development for more efficient running Corvettes
• Better use of by-products such as burning for
  heat

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Price Elasticity for Demand

• Price elasticity is the percentage change in the
  quantity demanded divided by the percentage
  change in the price

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Price Elasticity of Demand

• If the price of Corvettes rises and the price of
  its competitors stays the same the quantity
  demanded will decrease.

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Profit Maximization

• Profits are maximized when
• Distance between total revenue and total cost is
  the greatest (when TRTC)
• Marginal Revenue Marginal Cost

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Advertising

• Advertising is used by Corvette to differentiate
  their cars from other competitors
• It informs and persuades buyers
• Why is advertising an important input for a firm
  to consider?

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Advertising

• Affects the demand
• If Corvettes are more desirable, more people will
  demand them
• The ads must reach out to the correct target
  market.