SUPPLY ANALYSIS

Submitted by
Sai Ganesh
22STUCHH010629(SEC-F)
Report submitted for Engineering Economics
course (MG201)
Dr Balaji Vejju

Department of DSAI
IcfaiTec(Deemed to be University)
HYDERABAD
March,2024
 Contents
CHAPTER1-INTRODUCTION--------3
CHAPTER2-REAL LIFE EXAMPLE OF SUPPLY ANALYSIS
(TESLA)---- ----7
2.1: DOWN SHIFT -------8
2.2: UPWARD SHIFT------- 10
2.3: DEMAND CURVE EXPECTATION----11
2.4: DEMAND CURVE FOR TECHNOLOGY-12
CHAPTER3: CONCLUSION-------14
CHAPTER 1: INTRODUCTION TO SUPPLY ANALYSIS
AND FACTORS INFLUENCING SUPPLY
I) Definition of supply chain analysis:
Supply analysis involves examining the factors that influence
the quantity of goods or services that suppliers are willing and
able to produce at different prices. It is a crucial aspect of
economic analysis that helps in understanding market
dynamics and the behavior of producers. In the context of
engineering components, supply analysis is essential for
manufacturers and consumers to comprehend the
availability and accessibility of these critical parts in the
market.

II) Objective of the report:

Identify and analyze the key factors affecting the supply of
engineering components, such as price, cost of production,
technology, government policies, and expectations.
Evaluate the impact of these factors on the supply curve for
engineering components, using real-world data or
hypothetical scenarios to illustrate how changes in these
factors can affect supply
Provide insights for businesses and policymakers on how to
manage and optimize the supply of engineering components
in response to changes in market conditions.
Offer recommendations on strategies that businesses can
adopt to enhance their supply chain management and
improve the efficiency of production and supply of
engineering components.
Contribute to the existing body of knowledge on supply
analysis in the context of engineering components, helping to
advance understanding and decision-making in this field.
III) Factors Influencing Supply
Price of the Component: As the price of an engineering
component increases, suppliers are willing to produce more
of it, leading to an increase in supply. Price elasticity of
supply is a key concept to understand how responsive
suppliers are to changes in price.
Cost of Production: - The cost of materials, labor, and other
inputs affects the supply of engineering components.
Changes in production costs can impact the quantity
supplied at each price level.
Technological Advancements: Improvements in technology
can lower production costs, leading to an increase in the
supply of engineering components. Adoption of new
technologies can also affect the efficiency of production
processes.
Number of Suppliers: The number of suppliers in the market
can influence the overall supply of engineering components.
More suppliers entering the market can increase competition
and lead to an increase in supply.
Expectations: Suppliers' expectations about future prices
can influence their current supply decisions. If suppliers
expect prices to rise in the future, they may reduce supply
now to take advantage of higher prices later.
Government Policies: Regulations, subsidies, and taxes can
affect the cost of production and, therefore, the supply of
engineering components. - Government policies can also
impact the ease of doing business for suppliers, which can
affect supply.
Natural Disasters and External Factors: Events such as
natural disasters or political unrest can disrupt the supply
chain, leading to a decrease in supply. Suppliers may also
face challenges related to transportation and logistics,
affecting supply.
IV)Research Questions
What are the key factors influencing the supply of engineering
components in the current market?
How do suppliers' expectations about future prices impact
their current supply decisions for engineering components?
 CHAPTER 2: REAL LIFE EXAMPLE OF SUPPLY
ANALYSIS (TESLA)
*Scenario
Tesla, a leading electric vehicle (EV) manufacturer, is
experiencing challenges in its supply chain for batteries, a
critical component of its vehicles. The company relies heavily
on lithium-ion batteries for its EVs and is facing constraints in
the supply of these batteries due to increased demand and
limited production capacity among suppliers.
Shifts in Demand Curve of the Tesla company
1.Down Shift
i) Changes in Income: If there is an overall increase in income
levels, more consumers may be able to afford Tesla vehicles,
leading to a rightward shift in the demand curve. As income
levels rise, more consumers enter the market for luxury
goods, including electric vehicles. Tesla's vehicles are
positioned as high-end, environmentally friendly cars, and an
increase in income can lead to more demand for these
vehicles.
ii) Subsidies and Incentives: Government subsidies or
incentives for purchasing electric vehicles can increase the
demand for Tesla vehicles, shifting the curve to the right.
Government subsidies and incentives, such as tax credits for
purchasing electric vehicles, can significantly reduce the
cost of owning a Tesla vehicle. This makes them more
affordable for consumers, leading to an increase in demand.
iii) Price of Substitutes: If the price of a substitute product,
such as a different type of component or technology,
decreases, consumers may switch to that product,
decreasing the demand for engineering components and
shifting the curve to the left. Tesla is known for its innovation
in battery technology and autonomous driving features. As
these technologies improve, Tesla vehicles become more
attractive to consumers who value cutting-edge technology,
leading to an increase in demand.
iv) Fuel Prices: Increases in gasoline prices could make
electric vehicles more appealing as a cost-effective
alternative, increasing the demand for Tesla vehicles and
shifting the curve to the right. Electric vehicles like those
produced by Tesla are seen as a cost- effective alternative to
traditional gasoline-powered vehicles, especially when fuel
prices are high. As fuel prices rise, consumers may be more
inclined to switch to electric vehicles, increasing demand for
Tesla's cars.
4)Environmental Concerns: Growing awareness and concern
about climate change could lead to an increase in demand
for electric vehicles, including Tesla's, shifting the curve to
the right. With increasing awareness about climate change
and environmental issues, more consumers are looking for
eco-friendly transportation options. Tesla's electric vehicles
produce Zero emissions, making them an attractive choice
for environmentally conscious consumers.
vi) Consumer Preferences: Consumer preferences can
change over time, affecting demand for Tesla vehicles.
Factors such as design, features, brand reputation, and
perceived value can all influence consumer preferences and
impact demand. Changes in consumer preferences towards
more environmentally friendly vehicles or towards Tesla's
brand specifically could impact demand and shift the curve.
 DOWNWARD SHIFT
2.UPWARD SHIFT
Upward Shift: Increase in Disposable Income: If consumers
have more money to spend, they might be willing to buy more
Tesla cars even at slightly higher prices. An upward shift in the
demand curve for Tesla's electric vehicles could occur due to
several factors:
Technological Advancements: Breakthroughs in battery
technology or autonomous driving features could make Tesla
vehicles more attractive to consumers, leading to an
increase in demand at each price level.
Increase in Income: If there is a general increase in income
levels, more consumers may be able to afford Tesla vehicles,
leading to a higher quantity demanded at each price level.
Environmental Awareness: Growing concern about climate
change and environmental issues could lead to a shift in
consumer preferences towards electric vehicles, increasing
demand for Tesla's cars.
Competitor Actions: Actions taken by competitors, such as a
decrease in the production of competing electric vehicles or
an increase in their prices, could make Tesla vehicles more
attractive by comparison, increasing demand.
Changes in Consumer Preferences: Shifts in consumer
preferences towards more sustainable and innovative
products could lead to an increase in demand for Tesla's
electric vehicles.
3.DEMAND CURVE EXPECTATION : The demand curve of
expectations represents how consumers' expectations
about future prices or economic conditions can impact their
current demand for a product. It suggests that consumers
may adjust their purchasing decisions based on their
expectations of future events.

Here's how the demand curve of expectations might look:

Expectations of Price Increase: If consumers expect the price
of a product to increase in the future, they may increase their
current demand to avoid paying a higher price later. This
would lead to a rightward shift in the demand curve.
Expectations of Future Abundance: Conversely, if consumers
expect a product to become more abundant in the future,
they may decrease their current demand, anticipating that
they can purchase the product more easily later.
 DEMAND CURVE EXPECTATION GRAPH

4.Demand curve for technology :The demand curve for

technology represents the relationship between the price of
a technological product or service and the quantity
demanded by consumers Here's how the demand curve for
technology might be described:
Price Elasticity: The demand for technology is often elastic,
meaning that changes in price lead to proportionally larger
changes in quantity demanded. This is because consumers
are usually responsive to price changes when it comes to
purchasing technology products.
Consumer Expectations: Consumer expectations about
future technological advancements or price changes can
also impact the demand curve for technology.

GRAPH FOR DEMAND CURVE TECHNOLOGY

CHAPTER3: CONCLUSION
In conclusion, conducting a supply analysis for engineering
components involves identifying and analyzing key factors
that influence supply, such as production costs, technology,
government policies, and supplier expectations. By
understanding these factors and their impact on the supply
curve, businesses can make informed decisions to optimize
their supply chain and improve efficiency. Factors such as
technological advancements can lead to an increase in
supply, while increases in production costs or regulatory
changes can decrease supply. By analyzing these factors and
their interrelationships, businesses can anticipate changes
in supply and develop strategies to mitigate risks and
capitalize on opportunities. Additionally, the supply analysis
provides insights into challenges faced by suppliers and
opportunities for improvement. By addressing these
challenges and implementing best practices, businesses can
enhance their competitiveness and ensure a stable and
reliable supply of engineering components. Overall, a
comprehensive supply analysis is essential for businesses to
understand the dynamics of the supply chain, identify areas
for improvement, and make informed decisions to optimize
supply and enhance performance.