Paper Summary:

This paper identifies how the automotive industry is affected by the economy, especially in light of the ever-increasing cost of oil. The paper reviews the relevant literature to determine the automotive industry price elasticity of supply and demand, the negative and positive externalities produced by the industry, how wage inequality is measured and its current presence in the industry and monetary and/or fiscal policies that serve to affect the automotive industry. The paper relates that during periods of economic downturns, American consumers will increasingly demand more fuel-efficient vehicles and alternative fuel vehicles and will buy fewer new vehicles.

Outline:
Review and Discussion
Conclusion

From the Paper:

"As the average price of gasoline tops $4.00 a gallon across the country, it is little wonder that an increasing amount of attention has been paid to the automotive industry recently. Today, an increasing number of consumers are demanding that the industry become more responsive to the growing energy crisis facing the country and develop vehicles that are more fuel efficient and less costly to maintain. While the pundits continue to debate the respective efficacies of various alternative fuel approaches and the need for more domestic production, it is clear that these trends are going to continue for the foreseeable future and the cost of oil will just keep rising for the next decade or so - at least. In this environment, identifying how the automotive industry is affected by the economy assumes new relevance and importance and this topic forms the thesis of this study."

Sample of Sources Used:

• Baily, M. N., Farrell, D., Greenberg, E. et al. (2005, November 7). Increasing global competition and labor productivity: Lessons from the U.S. automotive industry. Federal Reserve Board. [Online]. Available: www.frbsf.org/economics/conferences/0511/4_ IncreasingGlobalCompetition.pdf.
• Beene, R. (2007, February 22). U.S. auto industry is already in a recession, Ghosn says. Associated Press: Autoweek. [Online]. Available: http://www.autoweek.com/apps/ pbcs.dll/personalia?ID=AUTOMOTIVENEWS&category=contact.
• Elasticity of demand. (2008). University of Rhode Island. [Online]. Available: http://www. uri.edu/artsci/newecn/Classes/Art/INT1/Mic/Elast/index.elast.html.
• Mankiw, N. G. (2004). Principles of economics, 3rd ed.
• Hewitt, B. (2007, May). Popular Mechanics. [Online]. Available: http://www.popular mechanics.com/automotive/new_cars/4215489.html.

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