Eco 372 Week 2 Product Purchases & the Economy

1072 Words Nov 4th, 2015 5 Pages
Product Purchases and the Economy

ECO/372

October 12, 2015
Product Purchases and the Economy

A new car purchase is one that takes a large amount of consideration and budgeting. The most important economic indicators to consider when investing in an automobile purchase are unemployment rates and interest rates. These indicators will assist a person when deciding whether to purchase new or used. Is the right time now or later to purchase a truck?
Economic Indicators The automotive sector is a cyclical business. Since it is a cyclical business, changes in the revenues and earnings of automotive companies are more likely due to the state of the economy and the strength of the consumer. Sales in the automotive sector
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economy continues to improve (Neal E. Boudette, Jan. 2014). So far, pricing in the U.S. market has been trending upward, not falling. The “discipline” of major competitors has thus far helped in matching production to demand.
Supply & Demand - Impact on the price It is basic economic principle that states that when there is an oversupply of a good or service, prices fall. When there is a high demand, prices tend to rise. It turns out that the more new cars that are sold, the lower used car prices will go. In 2014, people bought more than 16 million new cars and 38.5 million used cars. Analysts expect even stronger used car sales in 2015 (U.S. News, Jan. 2015). “Supply drives [used car] values,” (Larry Dominique, Jan. 2015). The supply of used cars is growing because most people who buy a new car have an old one to trade in. That trade-in enters the used car market, expanding the supply and lowering prices. Used car prices are, on average, 2 percent lower than they were a year ago. The price of used trucks and SUVs are actually up 1 and 3 percent. If new car sales continue at this pace, prices are expected to decline overall. Demand for used cars tends to go up between Thanksgiving and Christmas, with the tendency of prices to drop in January and another rise in February. Car prices are expected to continue to fall through 2018. Some automotive classes, like SUVs and trucks, are more popular now than others. That popularity drives up prices. Prices on

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