Price elasticity of demand measures the responsiveness of people to changes in economic variables.
- Elastic demand - Large percentage change in quantity demanded for given percentage change in price (Ed>1)
- Inelastic demand - Small percentage change in quantity demanded for given percentage change in price (Ed<1)
- Unit elastic demand - Equal percentage change in quantity demanded for given percentage change in price (Ed=1)
The demand for hybrid cars in Malaysia
Budget 2012: Hybrid car incentives extended till 2013!This just in. Prime Minister Datuk Seri Najib Tun Razak, who is also Finance Minister, is reading his Budget 2012 speech at the moment, and he has already touched on something that involves the auto sector, announcing that incentives given to hybrid cars have been extended till 31 December 2013!
Here’s some background: In Budget 2011, the government introduced FULL import duty and excise duty exemption for hybrid and electric cars and motorcycles.
Previously, it was 100% import duty exemption and 50% excise duty exemption, Budget 2011 made it 100% exemption for BOTH import duty and excise duty. The deal, for hybrid cars with 2.0 litre engines and below, was supposed to expire on Dec 31, 2011.
This has led to huge growth in sales for hybrid models such as the Honda Insight and Toyota Prius, while Lexus took advantage of this incentive to bring in the CT 200h hatchback at an attractive price. Honda Malaysia and UMW Toyota will be happy with today’s announcement and can plan ahead from now, bringing in more of the hybrids.
Here’s some background: In Budget 2011, the government introduced FULL import duty and excise duty exemption for hybrid and electric cars and motorcycles.
Previously, it was 100% import duty exemption and 50% excise duty exemption, Budget 2011 made it 100% exemption for BOTH import duty and excise duty. The deal, for hybrid cars with 2.0 litre engines and below, was supposed to expire on Dec 31, 2011.
This has led to huge growth in sales for hybrid models such as the Honda Insight and Toyota Prius, while Lexus took advantage of this incentive to bring in the CT 200h hatchback at an attractive price. Honda Malaysia and UMW Toyota will be happy with today’s announcement and can plan ahead from now, bringing in more of the hybrids.
- Cars are classified into luxurious goods therefore this case is determined as elastic demand
- When the Malaysian prime minister decided to extend the hybrid car incentives, this made the demand for hybrid cars increase greatly. Thus, leading to a huge increase in sales for Toyota, Honda and Lexus hybrid car models.
- "Total hybrid vehicle sales jumped over 2,000% to 8,334 units in 2011 from 328 a year earlier due to the ongoing excise duty exemptions on such vehicles.Honda recorded a surge in hybrid vehicle sales to 4,596 units from 129 in 2010, while Toyota sold 2,457 units versus 198 previously. Lexus sold 1,267 units compared with just one unit previously. Porsche, meanwhile, sold 14 units last year."(Thestar.com.my 2012). This shows the increase of demand caused by lowered prices on hyrbrid cars in Malaysia.
Awesome stuff! Keep up the good work - Kevin
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