Eco 205 Final Paper

The automobile industry is one of the world’s largest industries, and one of the most influential on the global economy. This is especially true for the United States. Japans automotive industry is the second largest automotive industry in the world, followed by China. The United States’ economy is heavily transportation based, and the automobile industry is affected by several others, most notably the oil industry. Automobiles, along with houses, can be status symbols; everyone always wants the newest model, the most expensive brand. At the same time, almost everyone uses an automobile and over the years it has become a necessary commodity. The automobile industry provides thousands upon thousands of jobs, and in the last century the automobile has revolutionized the world, and become an indispensible aspect of the global culture.
      Supply and demand refers to the quantity of a given product in relation to how many people want it, and this controls the price of the given item as well as inflation, among other things. The supply curve is the graphical representation of the relationship between the quantity of goods supplied and the current market price. Demand curve is the graphical representation of the relationship between the quantities of goods purchased. Elasticity is the concept involved in understanding this theory of supply and demand. If the number of substitutes for the product is more, the elasticity will be high. In the short run, of course demand seems elastic because the purchase can usually be put off for a while. However, the demise of GM proved that, in the long run, demand is inelastic for automobiles, because few substitutes are available (Xiaoning, 2009). Taxis and buses are not practical for many of the uses consumers need them for, especially if one does not live in an urban area. Depending on the case, an automobile could either be a necessity or a luxury, however most households depend on them as a necessary means of travel. The price...