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Price Elasticity of Demand - Tesla cuts prices again to lift sales

Graham Watson

8th March 2023

A nice bit of applied microeconomics for you; why have Tesla dropped the price of their cars again? Is it to offset the effects of the cost of living crisis, and attract buyers at a time when there's greater competition in the market for electric vehicles?

Or is it the application of PED? Might a cut in prices lead to an increase in total revenue? I'd doubt it but you might have a think about the circumstances under which this would occur.

Tesla has cut the prices of its most expensive models in the USA for a second time this year with the starting price of the Model S being reduced 5% to $89,990

Please read: BBC News - Elon Musk's Tesla cuts prices again as tries to boost sales

Tesla Motors (now known as Tesla, Inc.) is an American electric vehicle and clean energy company founded in 2003 by Elon Musk, JB Straubel, Martin Eberhard, Marc Tarpenning, and Ian Wright.

The company designs, manufactures, and sells electric cars, solar panels, energy storage systems, and related products. Its flagship electric cars, the Model S, Model X, Model 3, and Model Y, are widely popular and have received critical acclaim for their performance, safety, and sustainability features.

Tesla's mission is to accelerate the transition to sustainable energy and reduce the world's dependence on fossil fuels. The company has pioneered the development of electric vehicle technology and has invested heavily in research and development to make its products more efficient, affordable, and accessible.

Tesla is headquartered in Palo Alto, California, and has manufacturing plants in the United States, China, and Europe. It has become one of the most valuable car companies in the world and has played a significant role in the transformation of the automotive industry towards more sustainable practices.

Graham Watson

Graham Watson has taught Economics for over twenty years. He contributes to tutor2u, reads voraciously and is interested in all aspects of Teaching and Learning.

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