Question

Write one page about for a product or service of your choice, the price of the product or service compared to other competitor prices (who are the top competitors, and the business or organization that sells the product. Identify three fiscal policies. Explain how the three fiscal policies impact supply and demand for the chosen product or industry. What causes movement or shifts in supply and demand for your chosen product or service? Forecast what the price of the product will be in a year and explain why? Are there any controversial issues surrounding the product or service?
A general introduction to the paper including the name of the product or service, and industry. Explain why you chose the product or service and industry.
A detailed discussion of the specific topic you have chosen. Select three fiscal policies and explain the impact on the product or industry. This is the body of your essay assignment. Support and document your findings with citations from your sources.
A concluding paragraph reflecting on the process of research and the future of the product or service and anticipated price in the future.

Answer 1

The product of choice is a motorbike. There is a huge market for motorbikes with several different manufacturers bringing out different styles of the same. The price range in this case depends not just on the specifications of the bike in question but on the brand as well. There are motorbike models that are expensive just because of the brand value. Motorbikes are one of the most common sites one can see on the roads nowadays. This has become not just something poeple buy out of need but also something poeple buy out of want, or even luxury, at times. It is true that some people also purchase motorbikes as a necessity for their daily commute, however, it is seen that with oublic transport being avaiable in almost all countries, motorbikes are rapily becoming a comfort or luxury good. It can be relatively cheaper than any alternative means of transport and can also be realtively faster. Comparing the price ranges of the different brands available, it is difficult to find a very stark difference. This is because most brands are more or less trying to capture the same market segment. Hence, most of these motorbikes are quite closely priced, except for some brands that are preferred or bought because of the "name".

The three tools of fiscal policy that can be identified are taxes, subsidies and government spending. These will have very different affects on the industry for motorcycles. Let us first consider taxes. The government can, in a variety of different ways, affect the rates of taxation that will ultimately affect the sale of bikes. It can increase income tax, sales tax or import tax. In any of these three scenarios, the sale of moorbikes will reduce. If income tax is increased, people will have lesser income left for consumption and naturally, purchase of luxury items will reduce. In the event where the government increases import duties, it will be more expensive for the those manufacturers who import their products or its parts from other assembling nations. This would again increase the price of the bikes and discourage sales. Similarly, if sales tax is increased on the sale of motor bikes, then this tax will be passed on to the customers in the form of higher taxes and that will end up reducing the sales.

If we talk about the second fiscal policy measure, the government could subsidise the domestic manufacturers to increase their sales and prevent outsourcing of machines and parts. If this takes place, then the domesically manufactured bikes would be cheaper than the ones that are imported. The domestically manufactured bikes will hence sell more than the imported ones in the market. Lastly, if the government increases its own spending. It is likely that if the government spends, it will be for better infrastructure and for employment. The only way to do this is to build better public transport system in the country. The government will want to spend on metro systems and more buses, more frequent and better managed trains, better and faster highways and better traffic control. If the government is able to thus create better public transport systems, the sale of motorbikes will go down as more people will find it easier and cheaper to use the public transport than spend money on buying their own vehicles.

There can be other factors that will cause the demand for motorbikes to change without any impact on its price. Some of these reasons can be change in interest rates and change in fuel prices. If the interest rates are low, then the people would spend more instead of saving in the banks, and this will increase the sale of bikes. People will also be able to avail cheaper vehicle loans. If the crude oil prices reduce, fuel will be cheaper and more people will think about owning their own vehicles. At the curernt scenario when the entire world economy is down, prices of motorbikes are likely to be low. In addition, crude oil prices have also been on the low. All this should create an increased demand for motorbikes once after this pandemic is over with.