Extract B: The cooling market for premium e-cargo bikes
An immaculate, top-tier e-cargo bike, just 12 months old, is listed on a popular online resale platform. Despite retailing new for £6,200, it struggles to attract bids and eventually sells for just £2,800. Across the country, similar high-end electric cargo and commuter bikes from premium brands are experiencing a severe plunge in second-hand values.
In late 2023, sales of new premium e-bikes in Europe fell by 35% compared to the same period in 2022. In response, major assembly plants in Germany and the Netherlands have reduced shift patterns or temporarily paused production to manage built-up inventory.
Several factors explain this downturn. Higher interest rates have restricted the availability of low-cost personal financing and corporate leasing schemes, which previously drove premium sales. Many households are now trading down to budget non-electric bicycles or delaying upgrades. Furthermore, to clear excessive warehouse inventory, retailers have slashed prices of brand-new current-year models by an average of £1,500. With such heavy discounting on new premium models, buyers are unwilling to pay high prices for second-hand equivalents. Second-hand valuations are predicted to remain depressed until the industry-wide surplus is cleared.
With the help of a demand and supply diagram and the information in Extract B, explain the reasons for the falling prices of second-hand premium e-cargo bikes in 2023.
256 exam-style questions on AQA A Level Economics 1.3 Price determination in a competitive market, covering 1.3.1 The determinants of the demand for goods and services, 1.3.2 Price, income and cross elasticities of demand, 1.3.3 The determinants of the supply of goods and services, 1.3.4 Price elasticity of supply, 1.3.5 The determination of equilibrium market prices, and 1.3.6 The interrelationship between markets. Each one has a worked solution and a mark scheme showing where the marks go.