You Make the Call-Situation 3

question 59

Essay

You Make the Call-Situation 3
In the late 1990s, entrepreneur Neil Peterson was traveling in Europe when he observed what to him was a new way to own a car. It was called car sharing. Under this concept, the customer doesn't buy a car outright but uses the vehicle as a person would a timeshare property. The concept isn't totally new to the United States but hasn't yet caught on. Peterson has big plans. He wants to bring the car sharing concept to large U.S. cities. His research, based on American Automobile Association data, showed that the average cost of owning or leasing a new car, including insurance, is around $625 a month. He believes the average car-sharing member will pay only $100 a month.
(Source: Kortney Stringer, "How Do You Change Consumer Behavior?" http://www.entrepreneur.com/Your_Business/YB_PrintArticle/ 0,2361,310457,00.html, June 7, 2004.)

---

Definitions:

Market Equilibrium

A state where the supply of a product matches its demand, resulting in stable prices.

Quantity Demanded

The aggregate quantity of a product or service that buyers are prepared to buy at a given price.

Excess Supply

A situation where the quantity of a product offered for sale by producers exceeds the quantity that consumers are willing to buy at a given price.

Quantity Supplied

The total amount of a specific good or service that producers are willing and able to sell at a particular price over a given period of time.