Critical discussing how new technologies impact the equilibrium in product markets. Elaboration on the potential implications of this technology on the economy as a whole
This essay discusses how technologies affect the equilibrium in the product markets taking a microeconomic and macroeconomic approach. It focuses in the automotive sector, a mature industry, with extensive economy of scales, capital intensive and oligopoly competition but with some trend to perfect competition.
Two kind of technologies are discussed:
- Technology that impacts the supply curve. It is considered technologies that improve the efficiency and flexibility of production lines in C-segment or medium size vehicles like Ford Focus.
- Technology that impacts the demand curve. It is discussed how autonomous driving can affect the demand for Ford Focus, later the study is expanded to all C-segment vehicles.
First technology helps to explore how technologies that bring an improvement in production lines, impact to the supply curve. In the microeconomic discussion, we define the equilibrium and how the technology brings an increase in the supply curve. We argue the benefit to consumers and firms from sales revenue and review the implication of the elasticity of the demand to the revenue. We end the chapter differentiating between the sales and profit.
In the macroeconomic analysis, it is introduced PPF and the effect of the technology. Later presented more complete macroeconomic model, with aggregated demand, supply, inflation and national production. Finally, developed the arguments how monetarist and Keynesians would tackle the issue of inflation.
Second technology is autonomous driving, that brings an increase to demand curve. Microeconomics section is focused in a single brand, and developed that, the technology brings an increase in the demand curve and a reduction of the elasticity. It is explored the microeconomic equilibrium when the complete segment implements such technology.
The macroeconomic part follows a similar route than previous technology. First analyses the effect in PPF arguing that the technology brings a general expansion of the economy. Later, is presented the impact in the demand curve and similar argumentation for monetarist and Keynesians.