Demand Curve - Toyota Prius Hybrid

Introduction

Toyota Prius Hybrid has achieved good reputation and great sales since it launched United States in 2001. After a decade, the sales and market position of Toyota Prius Hybrid is in question since many other auto makers have produce similar products to enter the hybrid car market in this year. In addition to recent change in the economy and Toyota’s production plant in Japan, the position of Toyota Prius Hybrid has substantial changes in the market. I would use demand and supply curve as well as price elasticity of demand and supply in this project to better evaluate and illustration this changes and phenomenon. First, I would explain the law of demand and elasticity of demand through demand curve and demand schedule. This section would show the demand of Toyota Prius and how responsive consumers react to the price of Prius. Second, I would explain the change on demand base on the change in the economy. The third section would show the supply of Toyota Prius depicted by supply curve. The fourth section explains how the Japan disaster on March affected the supply of Prius. And then, I would give explanation on how the market works and market equilibrium. In the last section, both factors of change in demand and supply would be combined in order to illustrate the current market position of Toyota Prius Hybrid. After these applications, we will have exclusive view and understanding in the market of Toyota Prius Hybrid.

Law of Demand & Price Elasticity of Demand

Graph 1b illustrates the demand curve of Toyota Prius Hybrid which showing the relation between price and quantity demanded. Every value for price of goods i (Pi), which i represents the goods in question (in this case, it refers to Toyota Prius Hybrid), is depicted on the vertical axis. The value of quantity demanded of goods i (QDi) is depicted on the horizontal axis. The downward-sloping line relating the price and quantity demanded is called the demand curve. The law of demand states that, other things remaining equal, the quantity demanded of a good falls when the price of the good rises, and the quantity demanded of a good rises when the price of a good falls. This statement explains the inverse relationship between quantities demanded and price which resulted in the demand curve being negatively sloped. Let’s refer back to the demand curve of good i, at the price of $25,000, consumers would like to buy 15,625 of good i. When the price falls to $20,000, consumers would like to purchase more of good i; thus, the quantity demanded increased to 23,750 of good i. However, when the price rises to $30,000, consumers bought less of good i in which resulted in quantity demanded to 8,000. Both Graph 1a and 1b have clearly showed the phenomenon of the law of demand between price and quantity demanded while other things remain constant. This movement along the demand curve that occurs when the