Nano.
On this day it become the cheapest car available, selling for half the price of the next
cheapest car. For the price of $1000, a brand new, Nano could be bought or, for example, a
second-hand 1993 Land Rover.
The Nano is now produced in Sanand in Gujarat, in a factory which has the capacity to
produce 250000cars a year. Tata Motors employs 2200 workers, including car designers, to
make the Nano at the factory. With cars becoming more sophisticated, and the
manufacturing process becoming more complex, the production process at the Sanand
factory, and other car factories in India, is becoming more automated. Robots are now
undertaking a number of functions that before were undertaken by humans.
The car was intended initially for the home market. It was hoped that millions could be sold
in India. The firm also planned to export the car to Latin America, South-East Asia and Africa.
Although selling the car at such a low price made car ownership more affordable for more
people, there were still many millions of people who would like a car, but did not have the
income to buy one.
The sales of the Nano have not only yet met the hoped-for level. In 2014, only 19000 Nanos
were sold. A year later sales rose, but only to 24200. The cost of producing the Nano was
higher in 2016 than its selling price which was then $1500. The disappointing sales and loss
being made, led some people to suggest that Tata Motors should devote fewer of its
resources to Nano cars and more to other cars. Other point out that Tata Motors could
produce more types of other cars and save costs by closing a number of its factories, as
most are working with spare capacity.
Referring to the source material in your responses, answer all questions.
a) Identify an example of the factor of production labor used in producing the Nano. (1)
-car designers
b) Calculate the average number of Nano cars produced per worker in 2015. (2)
24200/2200= 11
c)Explain what was a possible opportunity cost of buying a new Nano car in 2008. (2)
-Opportunity cost is the cost of a decision in terms of the best alternative given up to achieve it.
The opportunity cost of buying a new Nano car in 2008 could be the money you would have
purchased of a second-hand 1993 Land Rover instead of buying a new Nano car. The
opportunity cost of producing a new Nano car in 2008 could be the other types of car that Tata
group could be produced as a result.
d)Explain two examples of the economic problem. (4)
Resources used up in the products and services are finite or limited in supply but human
wants for these goods and services are unlimited. This results that the economic problem of not
being able to satisfy everyone’s wants arises because of this scarcity.
For example, Tata wants to produce more types of other cars but its resources used to
produce these types of other cars are limited. At any given time, there are only a limited
e) Analyze one reason why the number of car workers may have recently declined in India. (4)
Advance in technology enable capital goods to produce a higher output and a better-quality
output. With cars becoming more sophisticated and the manufacturing process becoming
more complex, the production process at Sanand factory and other car factories in India is
becoming more automated. Therefore, the development of robotics in car production has
increased significantly the number of cars that a car factory can produce. Robots are used to
replace instead of using the car workers in the car production. The car industry may become
more capital intensive, machines replacing workers or more capital equipment per worker
enables workers to produce more output.
f) Analyze using production possibility curve, Tata’s output of cars in 2015. (5)
-Draw PPC diagram
Tata’s output of cars in 2015 increased than the output of cars in 2014. Therefore, the
production possible curve for Tata’s output of car shift toward the point from A to B.
g) Discuss whether a car is a capital or a consumer good. (6)
A car may be both a consumer good and a producer good. Capital goods are not wanted for
their own sake, but for what they can produce. In contrast, consumer goods are wanted for the
satisfaction they provide to their owners. Therefore, a car is a consumer or a capital goods
that is necessary to consider who the user is and the purpose of its use. If a car is used for
transportation in production process of the car industry, the car will be considered a capital
goods. A car is not wanted for a car factory own sake but for what they use the cars in the
production process. On the other hand, a car will be considered a consumer goods if a car has
been purchased for personal by owner of a car factory for their own satisfaction.
h) Discuss whether the quality of workers used in producing Tata cars is likely to increase in
the future. (6)
The quality of labour can be improved as a result of better education, better training, more
experience and better healthcare. A better educated, better trained and more experienced
labour force will be able to carry out more difficult tasks, work with more complex machinery
and equipment, and produce more and better -quality products. The quality of the car workers
producing Tata cars may increase output if the workers have a better educated, better train
and more experience, and allow to use better and more efficient technologies to increase their
output. Therefore, the quality of workers used in producing Tata cars is likely to increase in the
future.
On the other hand, if the workers have a shortfall in education, training and more experience,
the workers used in the production of Tata cars will not be able to carry out more difficult
increase in the future.
