Economics class: Elon Musk signals willingness to sacrifice Tesla margins for market share

This article picked by a teacher with suggested questions is part of the Financial Times free schools access programme. Details/registration here.

Specification:

• Market structures

Click to read the article below and then answer the questions:

Elon Musk signals willingness to sacrifice Tesla margins for market share

• ‘Musk’s apparent willingness to see margins fall further, along with signs that the price cuts had only slightly lifted sales this year, have taken the edge off a strong rally’.  With reference to the quote, analyse the implications for the price elasticity of demand of Tesla cars

• In oligopoly, we refer to the kinked demand curve. Draw the curve and consider the extent to which it applies in this instance

• Draw a monopoly diagram and identify the point at which 1) profit is maximised; 2) revenue is maximised; and 3) sales are maximised

• Evaluate the extent to which price cuts alone will be sufficient to drive up sales volumes in the face of intense competition from other car manufacturers

Gavin Clarke, Emmanuel College