We are witnessing major technological and business innovations with the rise of electric vehicles (EVS) powered by batteries. Tesla was a market leader among EV manufacturers in 2022. It was also one of the few automotive firms that made a sizeable profit in 2021 and early 2022 (before a shutdown of its Shanghai factory). Read the following news articles to gain some background information for the required analysis in this question.

Furr, Nathan and Jeff Dyer (2020), 'Lessons from Tesla's Approach to Innovation', Harvard Business Review, 12th February, available: https://hbr.org/2020/02/lessons-from-teslas-approach-to-innovation

Shen, Michelle (2022) 'How much does it cost to make a Tesla? Earnings show reduced costs and high profits', USA Today, 2nd February, available: https://www.usatoday.com/story/money/2022/02/01/tesla-production-cost-earnings-report/9298931002/

Trefis Team (2021) 'Are Battery Cost Improvements Still A Big Driver Of Tesla's Margins?', Forbes, 1st December, available: https://www.forbes.com/sites/greatspeculations/2021/12/01/are-battery-cost-improvements-still-a-big-driver-of-teslas-margins/?sh=1489a69e4ae7

(i) Do some additional research and discuss two (2) different factors that resulted in shifting Telsa's demand curve and/or supply curve. Your analysis must include appropriate diagrams to discuss the shifts of demand curve and/or supply curve for Telsa's products. (ii) Discuss one (1) innovative strategy by Tesla that led to change in the shape (e.g., slope or steepness) of its demand curve over time. Analyze how change in the slope and shifting of Telsa's demand curves over time may increase or decrease Tesla's market power. Use appropriate diagrams to support your argument.

(b) Examine how Tesla made a profit in 2021 by using evidence from your research. Apply an appropriate market diagram to illustrate how Tesla used its market power to increase its profit margin^, set an optimal quantity, and determine a profit-maximizing price. You can use both actual and hypothetical values (rough estimates or guesses) for the quantity, price, and cost. (Hint: ^Let profit margin be the difference between selling price and the firm's marginal cost. Indicate this clearly in the diagram.)