Impact of Technology on Market Equilibrium in the Automotive Industry
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This report discusses the impact of technology on market equilibrium in the automotive industry. It explores the effects on supply and demand curves, the implications for the economy, and the application of microeconomics concepts in the industry. The report focuses on the automotive industry and its link to microeconomics.
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Economics 4/7/2019
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Economics1 Contents Introduction......................................................................................................................................2 Market equilibrium..........................................................................................................................3 Supply and demand curve............................................................................................................3 Technology Influencing Supply Curve............................................................................................4 Technology Influencing demand curve...........................................................................................5 Implication of this technology on the economy as a whole.............................................................7 Conclusion.......................................................................................................................................9 References......................................................................................................................................10
Economics2 Introduction The aim of the report is to explore the understanding as well as concepts that are linked to the microeconomics. Microeconomics is considered as the branch of economics that study about the behaviour of the firms as well as the individual that form the decision related to the use of scare resources. The report includes the discussion of the ways through which the technology creates the impacts on the equilibrium in product markets. In addition to this, it includes the elaborate on the possible implications of the technology on economy as whole. The industry on which the report focuses is automotive industry and links all the concepts with the Microeconomics.
Economics3 Market equilibrium The market equilibrium is a term that can be defines as the market point where request of the customer is equal to the source of the product. In the market, the point of equilibrium is straight linked with the influences of request as well as supply (Altman, 2017). The introduction of new technology in automotive can directly create the impact on the market equilibrium. Supply and demand curve The curve of supply and demand can be presented in form of graphical demonstration of quantity as well as value. The price in the graph is presented by y-axis and quantity on x-axis (Buckley, 2016). The outline of the original knowledge will lead to direct influence on supply as well as the demand curve and this affect will shift the demand curve either up or down. The impact of the shift in the supply and demand curve equilibrium can be explained with the help of the below given table with the introduction of new technology. Shift in the Demand curve (When supply of the product is unchanged) Shift to rightIt will lead to the upsurge in the demand that makes equilibrium to rise. Shift to leftIt will lead to reduction in the demand that is one of the reasons for reducing in the equilibrium. Shift in the Supply curve (When Demand of the product is unchanged) Shift to rightIt will lead to the upsurge in the source that makes the equilibrium to decrease. Shift to leftIt will lead to reduction in the supply that is one of the reasons for
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Economics4 increase in the equilibrium (Salvatore, 2015). Technology Influencing Supply Curve In the automotive industry, this has been found that technology affects the supply of the product. In the automotive industry, the supplies of the products like specific vehicles to the customers as well as firms get affected due to technological change. In the economic terms, this has been found that C-Segment vehicles in normal goods, in contraposition of the luxury or inferior goods. The introduction of new technologies can easily improve the efficiency in production that brings rise in the gains and leads to increase with right in the supply curve (Kreps, 2019). This has been witnessed with the concept of microeconomics that lowering the production cost will bring the rise in the output. Thus, the supply of the products increases in the market that brings the increase in supply curve due to technological advances for the companies like Ford or Volkswagen who deals in automotive industry. The image given below shows the shift towards the right from Qs1to Qs2,which means that supply, is increasing.
Economics5 (Source: Cowell, 2018) The introduction of the new technology is beneficial for the customers since the market leads to more vehicles at the fewer prices. The launch of the innovative technology in the competitive market will bring decrease in the value due to high supply in the market of products. However, some of the authors argue that massive automation brings the unemployment, which is considered, in the macroeconomics concept. This can be said that the automotive industry will find the decrease in the prices with the increase in supply. This decrease in the prices will ultimately affect the profit of company, as it will decrease. In addition to this, the investment, which is done by the companies involved in automotive industry in technology, will also affect the amount of total profit attained by them. Technology Influencing demand curve In the present world, the change in the demand curve generally occur according to the situation when there is increase or reduction in quantity demanded by the customers at the certain price. The overview of new technology in the vehicles will lead to rise in the request of product with the technology. Therefore, this has been found that there will be decrease in the demand of goods with the ancient technology (Ghironi, 2018). The below given image reflects the shift in the demand curve with introduction of innovative technology in the industry. (Source: Cowell, 2018)
Economics6 At initial level of demand at Q1 and price of product will be at P1. The launch of the new technology will bring the demand of the customers for the new product due to which it will have the rightward shift that is witnesses with D1 to D2. This will bring the increase in the price of the equilibrium from P1 to P2. This has been found that the technology affects the demand curve due to which there will be increase in the prices of the product (Cowell, 2018). This increase in the prices of the products with the rise in demand will offer the opportunity to the companies like Ford and Volkswagen to earn the high revenue in the market. Thus, this can be said that introduction of new technology creates the impact the equilibrium in the product markets. This has been witnesses up by analysing the shift that has been registered in demand as well as supply curve. Implication of this technology on the economy as a whole Macroeconomics is considered when different companies accept the exercise of acceptance or the changes related to the technology that affects the demand-supply cycle of the entire industry. The implication of the new technology will leads to the impact on the national economy. The below given are the points which elaborate how the implication of new technology on economy will influence the product market. Change in supply: - Supply of the product is influenced by the variations in technology in a way that reflects the way corporation growth its production. The suppliers of the company are required to offer the excessive supply of the products as well as services
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Economics7 with the motive to deal with the technology with the rise in demand in economy (Ehrenberg and Smith, 2017). Production possibility frontier (PPF): - This has been found that implementation of new technology will bring the rise in the productivity of companies. For instance, the update in technology of engine, logistics, as well as communication creates possibility in rise in standard of living. Contribution in growth of GDP: - The development in technology in the market of product will bring the rise in GDP of the nation. The new technology will bring the improvement in profitability that will contribute in improving the GDP. Along with this, the revenue of the company will indirectly lead to rise in per capital income (Acemoglu, 2012). Thus, it shows that technology bring the change in revenue which is directly leads to rise in growth. Business innovation: - In the present situation, there are different companies that are affected by updated technology which is must for every company to stay competitive in the market. Influence for international trade: - The development of the new technology has affected the business as they can easily exporttheir products to another country as they have brought the enhancement in technology. The technology will lead to the rise in the capacity of production. The improvement in the production will effectively make strong position of the company in international market. Employment opportunities: - The new invention of the technology offers an effective way to enhance the different job opportunities for the individual present in the market. The technology has benefited in developing the job opportunities (Razzak, 2015). For
Economics8 instance, the rise in use of app for test drive in automotive industry and for booking the appointments has led to improvement in employment opportunities for the network team and others.
Economics9 Conclusion In the end, the report talks about the technology changes that affect the equilibrium in the market of product. This has been found that there is increase in the increase in the supply curve as well as demand curve with the introduction of new technology with the use microeconomic concepts that include demand and supply, market equilibrium and many others. In addition, the possible implication of this new technology on the economy as a whole has been done with the different macroeconomic concepts that include employment, international trade and many others.
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Economics10 References Acemoglu, D. (2012) Introduction to economic growth.Journal of economic theory,147(2), pp.545-550. Altman, M. (2017) Economics (Micro, Macro Theory).The Wiley ‐Blackwell Encyclopedia of Social Theory, pp.1-13. Buckley, P.J. (2016)International business: economics and anthropology, theory and method. Springer. Cowell, F. (2018)Microeconomics: principles and analysis. Oxford University Press. Ehrenberg, R.G. and Smith, R.S. (2017)Modern labor economics: Theory and public policy. Routledge. Ghironi, F. (2018) Macro needs micro.Oxford Review of Economic Policy,34(1-2), pp.195-218. Kreps, D.M. (2019)Microeconomics for managers. Princeton University Press. Razzak, W.A. (2015) Wage, productivity and unemployment: microeconomics theory and macroeconomics data.Applied Economics,47(58), pp.6284-6300. Salvatore, D. (2015) Managerial economics in a global economy.OUP Catalogue.