Economic considerations profoundly influence the supply and demand dynamics in the car rental market. This essay will examine the major effects that changes in petrol prices and the accessibility of rental cars might have on this service-oriented industry.
Gasoline prices significantly influence the demand for automobile rental services. When gas prices rise, consumers frequently find themselves in a difficult situation. As the expense of owning and maintaining personal vehicles rises, many people look for affordable alternatives to traditional auto ownership (Rojas et al., 2020). Car rental services can help in this situation. The reasoning is simple: as petrol prices rise, a sizeable segment of the population prefers renting automobiles over driving their own. As a result, increased gas costs tend to cause the demand curve for automobile rental services to shift upward.
This change directly impacts the price and quantity in equilibrium. The equilibrium price rises with the spike in demand for car rental services. Companies that rent cars are in a position to charge more for their services. As more people choose car rentals as a convenient and affordable means of transportation, the equilibrium number of car rentals also rises. The supply of rental cars significantly influences the performance of the car rental sector (Zygiaris et al., 2022). The supply curve for automobile rental services is augmented when car rental firms opt to increase the number of vehicles in their fleets. As a result, there is a larger selection of rental cars for customers to select from.
It is remarkable how an increase in the supply of rental cars will affect equilibrium pricing and quantity. Car rental businesses must now compete more fiercely due to the increased availability of vehicles. These businesses must offer cheaper costs due to the intense competition to attract more customers. As a result, the equilibrium price for car rental services is expected to drop. As a larger selection of rental cars becomes a more appealing alternative for customers, the number of car hires increases simultaneously.
These changes in supply and demand are not mutually exclusive in real life. Increased gas prices and a wider selection of rental cars are two factors that could impact the rental car market at once. When this occurs, the total impact on the equilibrium price and quantity depends on the size of these movements and how supply and demand forces interact (Rapson & Muehlegger, 2023). The equilibrium price for car rental services will be significantly pushed upward if the rise in demand brought on by higher petrol costs is greater than the rise in supply brought on by a larger fleet of rental cars. In addition, the equilibrium quantity will increase, but at a higher cost. The equilibrium quantity will increase, but the impact on the price may be less obvious, resulting in a fall in price if supply growth outpaces demand growth.
In conclusion, the performance of the car rental business is closely correlated with economic variables like petrol prices and the availability of rental cars. Variations in gas prices may result in higher demand and pricing for car rental services, whilst an increase in the number of available rental cars may result in cheaper costs and greater demand for car rentals. The proportional magnitude of these movements and the dynamic interaction of supply and demand forces determine how they will ultimately affect equilibrium pricing and quantity. These economic factors produce a complicated, dynamic environment for the automobile rental sector, where success depends on adapting and responding to changing market conditions.
References
Rapson, D. S., & Muehlegger, E. (2023). The economics of electric vehicles. Review of Environmental Economics and Policy, 17(2), 000-000.
Rojas Rueda, D., Nieuwenhuijsen, M. J., Khreis, H., & Frumkin, H. (2020). Autonomous vehicles and public health. Annu Rev Public Health. 2020 Apr 2; 41: 329-45.
Zygiaris, S., Hameed, Z., Ayidh Alsubaie, M., & Ur Rehman, S. (2022). Service quality and customer satisfaction in the post pandemic world: A study of Saudi auto care industry. Frontiers in Psychology, 13, 842141.
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