8-1 Project Submission youtu.be/2O932t8-k2A?si=CYVHWoYg28YFNi9p

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Module Three Checkpoint Assignment

Najee, Alim-Frazer

Southern New Hampshire University

ECO 201: Microeconomics

Prof. Kevin, Fort

March 23,2025

Introduction

Tesla, Inc. is an American electric vehicle and clean energy company headquartered in Austin, Texas. Founded in 2003, Tesla designs and manufactures electric vehicles, battery energy storage solutions, solar panels, and related products. The company has revolutionized the automotive industry with its focus on sustainability and autonomous driving technology. Tesla's main revenue sources come from vehicle sales, energy storage, and software services, such as self-driving technology.

Supply and Demand

Over the past five years, Tesla has experienced a significant increase in demand for its electric vehicles due to global trends toward sustainability and government incentives for electric cars. The company's production capacity has also expanded, with new Gigafactories in China, Germany, and Texas.
Two determinants of supply:
1. Technological advancements: Improvements in battery technology and manufacturing efficiency have increased Tesla’s production capacity.
2. Government regulations: Tax incentives and emissions regulations have influenced Tesla’s ability to produce and sell electric vehicles at competitive prices.
Two determinants of demand:
1. Consumer preferences: Increased awareness of climate change and sustainability has driven demand for electric vehicles.
2. Income levels: As disposable income rises, more consumers can afford Tesla's premium-priced vehicles.

Price Elasticity

The price elasticity of demand for Tesla vehicles is generally **inelastic**, meaning that changes in price have a relatively small impact on demand. This is due to:
1. Lack of close substitutes: While other automakers produce electric vehicles, Tesla's technology, brand loyalty, and Supercharger network give it a competitive advantage.
2. Luxury market positioning: Tesla vehicles are priced as premium products, and consumers in this segment are less sensitive to price changes.
Impact on Pricing and Revenue:
Since demand is inelastic, Tesla can increase prices without significantly reducing sales. For example, in 2021 and 2022, Tesla raised prices multiple times due to supply chain constraints, yet demand remained strong, supporting revenue growth. Conversely, price reductions in early 2023 aimed to stimulate demand in a weakening economy.

Mankiw, N.G. (2024). Principles of economics (10th edition). Cengage.

Mankiw, N.G. (2024). Principles of economics (10th edition). Cengage.
Tesla, Inc. (2023). Annual Report. Retrieved from https://www.tesla.com
U.S. Department of Energy. (2023). Electric Vehicle Market Trends. Retrieved from https://www.energy.gov