Automotive Industry and Economy

Paper Summary:

This paper explores how the economy affects the automotive industry. Specifically, the paper discusses the effects of shifts and price elasticity of supply and demand and wage inequality on the automotive industry. Additionally, the positive and negative externalities and monetary and fiscal policy aspects are addressed. The writer concludes that overall, understanding the impacts of wage inequality, monetary and fiscal policies, and the price elasticity of supply and demand can help determine the outcome of the automotive industry.

From the Paper:

"There are many characteristics of supply and demand that impact the automotive industry. The automotive industry is a competitive market which consists of a market where there are several buyers and several sellers and both have a minor impact on the market price. Consumers within the automotive industry determine the shifts in supply and demand. There are several variables that can shift the demand curve. The main variables are income, prices of related goods, and substitutes. The automotive industry is affected by buyers' incomes. For example, if an individual loses their job they would have less money to spend on a new vehicle. In the automotive market there are numerous amounts of substitutes. When the price of one vehicle increases the demand for a substitute will increase. The supply shifts are an additional factor which can impact the automotive industry. As new auto companies open there will be a change in the equilibrium and the shift in supply. The number of sellers would increase the number of vehicles available and the price would decrease."

Sample of Sources Used:

• Cimpean, A. Automobile history: Chevy Nova. Helium. Retrieved on April 15, 2008, from http://www.helium.com/items/954336-industry-strictly-related-automobile
• Datelle, D. (1997, October, 1). Democratic Leadership Council. NAFTA's Effect on U.S. Jobs. Retrieved on May 20, 2008, from http://www.dlc.org/ndol_ci.cfm?kaid=108&subid=127&contentid=1391
• GAO. (2007, August 3). Vehicle Fuel Economy: Reforming Fuel Economy Standards Could Help Reduce Oil Consumption by Cars and Light Trucks, and Other Options Could Complement These Standards. Retrieved May 18, 2008, from MasterFILE Premier database.
• India: Automotive forecast. (2007, September 19). Business India Intelligence, Retrieved April 6, 2008, from Business Source Complete database
• Mankiw, N. G. (2004). Principles of economics (3rd ed.). Chicago, IL: Thomson South- Western.

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