Microeconomic Analysis: Technology's Influence on Automotive Industry

This economics report delves into the microeconomic principles governing the automotive industry, specifically examining the influence of technology on market equilibrium. The report begins with an introduction to microeconomics, defining its role in understanding firm and individual behavior in resource allocation. It then explores market equilibrium, supply and demand curves, and how technological advancements in the automotive sector impact these elements. The analysis includes shifts in supply and demand curves, illustrating how technology affects production efficiency and consumer demand. Furthermore, the report discusses the broader macroeconomic implications, such as changes in supply, the production possibility frontier, GDP growth, business innovation, international trade, and employment opportunities. The conclusion summarizes the report's findings, emphasizing the interplay between technology and economic factors within the automotive industry. References from economic literature are included to support the analysis.

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4/7/2019

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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

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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.

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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 right It will lead to the upsurge in the demand that makes equilibrium to rise.
Shift to left It 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 right It will lead to the upsurge in the source that makes the equilibrium to
decrease.
Shift to left It will lead to reduction in the supply that is one of the reasons for

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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 Qs1 to Qs2, which means that supply, is increasing.

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(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)

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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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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 export their 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

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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.

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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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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.