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Economics

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TABLE OF CONTENTS Introduction......................................................................................................................................3 Market Equilibrium..........................................................................................................................3 Effect of Technology on Product Market Equilibrium................................................................3 Implication for national economy if various firms are affected by the technology.....................7 Conclusion.......................................................................................................................................9 References......................................................................................................................................10

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INDEX OF TABLES Table 1: Changes in equilibrium due to shift in demand curve......................................................4 Table 2: Changes in equilibrium due to shift in supply curve........................................................6

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ILLUSTRATION INDEX Illustration 1: Shift in equilibrium...................................................................................................5 Illustration 2: Downward shift in equilibrium due to change in demand curve..............................7 Illustration 3: Shift in supply curve and change in equilibrium price..............................................8

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INTRODUCTION Market equilibrium can be defined as market point where demand of consumer is equivalent to the supply provided by the suppliers. Point of equilibrium is directly connected to the factors of demand and supply (Yomba, 2009). Due to this aspect, equilibrium will be shifted with the change in the factors that can make change in the demand and supply in the market.

Present study is focused on the evaluation of impact of technology at the point of market equilibrium. Further, evaluation of impact on change in technology will be done by considering macro-economic factors.

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MARKET EQUILIBRIUM 1). Effect of Technology on Product Market Equilibrium Equilibrium in economic terms is referred to a situation where demand and supply of any article or product are equal to each other. Every company tries to achieve and maintain equilibrium as shortfall in either demand or supply will lead the company towards loss (Siebert, 2007). Equilibrium of price in product market can be affected either by macro-economic factors or micro-economic factors.

Micro economics consists of factors, shift or alteration of which will affect only a small part of economy like particular unit or segment of industry while macro economics studies economy as a whole. Micro-economics relates to individuals and business decisions while macro economics helps in decision forming relating to whole country rather than every single unit (Tohidinia, 2011). Companies when adopt new technologies either to increase their revenues or enhancing their growth, there will be an impact on the product market equilibrium of that TOLL-FREE NO: +44 2038681671 WHATSAPP NO: +44 7999903324

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particular company. This is known as Micro-Economics because adoption of new technology by a company will affect the equilibrium position i.e shift in demand-supply of that company only.

2). Supply and demand curve Supply and demand curves can be defined as the graphical presentation of the price and quantity. In such graphs price is demonstrated on y axis and quantity of good is reflected on x axis. It is most basic and fundamental economic model for the prediction of the optimal prices in the market. Equilibrium price point is intersection point of demand and supply curve (Avlonitis and Giannopoulos, 2012). Change in technology will have direct impact on the supply and demand curve. In addition to this, it will also make shift in the point of equilibrium either to up or down.

By considering the type of good, technology could make complete elimination demand. It is because good will become obsolete as effective substitute good is developed by the technology (Boon and Wong, 2011). This aspect is mainly noticed in the mobile phones. In such situation demand is shifted from right to left and equilibrium price will be lowered where suppliers will not be able to supply good along with the profit.

2(i) Changes in demand curve Changes in demand curve is occurred in situation where there in increase or decrease in the quantity demand at particular point of price. Increase in demand at market will make rightward shift will decrease in demand will make leftward shift (Just and Rausser, 2007).

Impact of this shift on equilibrium can be understood through the following table: Table 1: Changes in equilibrium due to shift in demand curve Shifts in the Demand Curve (when supply is unchanged) It will make increase in It will cause equilibrium to Shift to the right demand increase It will make decrease in It will cause equilibrium to Shift to the left demand decrease Introduction of new technology in product market will make increase in the demand of product with the new technology. Consequently, there will be reduction in the demand in the TOLL-FREE NO: +44 2038681671 WHATSAPP NO: +44 7999903324

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product with the old technology (Changes in Demand and Supply and Impacts on Equilibrium, 2015). Impact of these changes in equilibrium point will be as follows: For example X company had launched new series of particular mobile phone i.e. 0001 in the market then there will be rightward shift in demand of product 0001. Position of equilibrium in this situation will be as follows:

Illustration 1: Shift in equilibrium (Source: Bold and Vega, 2003) At initial level demand of 0001 was at Q1 and price of product will be at P1. With the launch of new series, demand of new product will have rightward shift i.e. D1 to D2. By considering this aspect, it can be noticed that equilibrium will be attained at higher point and consequently price of equilibrium will be increase from P1 to P2. In this situation, there is upward shift in the point of equilibrium.

There will also be reduction in the demand of the good with the old technology and consequently price of the goods will be reduced in order to attain the point of equilibrium (Brooks, 2002).

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Illustration 2: Downward shift in equilibrium due to change in demand curve (Source: Changes in Demand and Supply and Impacts on Equilibrium, 2015) In accordance with this illustration, it can be noticed that demand of product in reducing from Q1 to Q2. Due to this aspect, there is leftward shift in the demand curve. In this situation in order to attain the point of equilibrium suppliers will be required to make reduction in the price of product with the old technology.

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By considering the factors of supply curve it can be said that launch of new technology in the product market will make increase in the equilibrium price of the new product (Avlonitis and Giannopoulos, 2012). Along with this it will make reduction in the equilibrium price of the product with old technology.

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2(ii) Changes in supply curve There is shift in supply curve with change in quantity of supply provided by the supplier.

Increase in supply makes rightward shift while reduction in supply will provide leftward shift (Wessels, 2000). Impact of this shift on the equilibrium price in the product market is as follows: Table 2: Changes in equilibrium due to shift in supply curve Shifts in the Demand Curve (when supply is unchanged) Shift to the right Shift to the left

It will cause equilibrium to decrease It will cause equilibrium to It will make decrease in supply increase It will make increase in supply

Introduction of new technology will also have impact on the supply curve. It is because; with the increasing demand various suppliers will tend to provide product in the market and consequently there will be right shift in the supply curve (Dowling, 2009). With the launch of new technology in competitive market, suppliers will make increase in the supply there will be right shift in supply in order to cope up with the demand. Due to this aspect, customers have the option for the purchase as supply is higher than the demand and consequently price of equilibrium will have downward shift (Avlonitis and Giannopoulos, 2012). This aspect can be noticed through following example: For example new technology of growing wheat in introduced in the market that can make reduction in the cost of production. In this situation, producers will be willing to supply more quantity in the market. Impact of increase in supply can be noticed through following illustration:

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Illustration 3: Shift in supply curve and change in equilibrium price (Source: Changes in Demand and Supply and Impacts on Equilibrium, 2015) This illustration shows that if quantity is increased from Q1 to Q2 then equilibrium will be attained at lower point as suppliers will be required to make reduction in the price of product. In addition to this, there will be reduction in the supply of product with the new technology because it is no longer profitable to the suppliers.

3. Implication for national economy if various firms are affected by the technology Macro-Economics is when various firms adopt the practice of adoption or change of technology affecting the demand-supply cycle of whole industry and thus there will be an impact on national economy. Product market equilibrium will be influenced when new technologies are adopted in a manner explained below : 

Change in Supply : Supply is affected by the technological changes in a way that how much a company is able to increase its production with such change in technology.

Suppliers will be required to provide excessive supply of goods and services in order to

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cope up with the increasing demand in the economy (Eaton, 2015). In addition to this, increase in supply will be supported by the improved technology. 

Production-possibility frontier (PPF): Technological advancement will make increase in the productivity of the companies which will provide upward shift to the graph. For example advancement in technology of transportation, energy systems, logistics and communication system will make increase in standard of living.



Contribution to the GDP growth: Technological improvement in product market will make increase in the GDP of the nation. It is because, organizations will be able to make increase in their profitability and consequently their per capita income will be increased (Reut and Scerri, 2009). Further, growth of businesses is connected to the growth of economy. For example if there is 10% growth in business than 10% of it will be transferred for the increase in GDP.



Business innovation: In situation where various firms are affected by the new technology then they will be work to launch more effective technology in the market in order to stay competitive. In this manner, fair competition will be increased in the market and organization will work in more effective manner (Moseley, 2010). With the innovative ideas, they can expand their business operations at the global level in order to attain higher profitability and growth.



Product development: New technology will make increase in the efficiency of business and there will be reduction in the cost of production. With this approach, business organizations will be able to make increase in their production capacity without spending high resources. Increase in production capacity will boost the economy but there will also be issue of unemployment (Dowling, 2009). It is because; technology will promote machine work instead of manual work. These factors show that technology have positive as well as negative influence of the economy.



Influence for international trade: With the invention of new technology, business organizations can export their goods to the another countries as improved technology will make increase in the capacity of production. In addition to this, national debt is connected

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with the trade between countries (Boon and Wong, 2011). Due to this aspect, increasing export will make position of the country strong at the international market and there will also be upliftment in rate of currency. 

Improved quality at lower price to the customers: Customer will also attain the benefit of improvement in technology. It is because, qualitative product will be available at lower price in the market (Siebert, 2007). This aspect will make increase in their purchasing power and consequently there standard of living will be improved.



Development of employment opportunities: New inventions of technology creates various jobs opportunities for the individuals. However, for this aspect they are required to learn new skills and change their job roles by considering the situation. For this aspect, technology advancement in wireless industry can be considered. This industry had provided employment to the thousand of workers for the App businesses and had supported in the growth of economy (Moseley, 2010). This aspect demonstrates that growing business has potential to make increase in the availability of jobs in order to balance the shortage of workers occurred due to instalment of new techniques in work practices.

By considering the above description, it can be noticed that wealth of nation will be

increased by the technological advancement in the economy. It is because, organizations are able to earn high profitability and customers are able to make increase in their living standards. In addition to this, it will also create opportunities for employment for further development.

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CONCLUSION In accordance with the present study, conclusion can be drawn that technology has significant impact on the equilibrium price in the market. With the improvement or decrement in the technology simultaneous impact can be noticed in the equilibrium price. It is because of the model of supply and demand in the economics. Further, if various competitive firms are affected by the implication of the technology then entire national economy will be influenced. It is because when various firms adopt the practice of adoption or change of technology then there will be effect the demand-supply cycle of whole industry.

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REFERENCES Books and Journals 1. Avlonitis, J. G. and Giannopoulos, A. A., 2012. Balanced market orientation: qualitative findings on a fragile equilibrium. Managing Service Quality: An International Journal. 22(6). pp.565 - 579.

2. Bold, F.X. and Vega, C., 2003. Micro Effects of Macro Announcements: Real-Time Price Discovery in Foreign Exchange. American Economic Review. 93. pp. 38–62.

3. Boon, S. and Wong, Y. C., 2011. The moderating effects of technological and demand uncertainties on the relationship between supply chain integration and customer delivery performance.

International Journal of Physical Distribution & Logistics Management. 41(3). pp.253 - 276.

4. Brooks, C., 2002. Introductory Econometrics for Finance. Cambridge University Press.

Cambridge. United Kingdom.

5. Dowling, E., 2009. Schaum's Outline of Mathematical Methods for Business and Economics. McGraw Hill Professional.

6. Just, E. R. and Rausser, C. G., 2007. General Equilibrium in Vertical Market Structures: Overselling Versus Overbuying, in Richard O. Zerbe ,Research in Law and Economics. Emerald Group Publishing Limited. pp.149 – 181.

7. Moseley, F., 2010. Criticisms of Aggregate Demand and Aggregate Supply and Mankiw's Presentation. Review of Radical Political Economics. 42(3). pp.308-314.

8. Reut, A. and Scerri, K., 2009. UK public finances and oil prices. Luxembourg: Publications Office.

9. Siebert, H., 2007. Global View on the World Economy: A Global Analysis. Routledge.

10. Tohidinia, A., 2011. The feasibility of effectual ethics on the foundations of micro and macro issues of economics. Humanomics. 27(4). pp.243 - 251.

11. Wessels, W., 2000. Economics. Hauppauge, NY: Barron's.

12. Yomba, P. J. S., 2009. Micro Economics to Macro Economics: The Concept of Market Exchange

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2. Eaton, J., 2015. Technology and the Global Economy [Online]. Available through <http://www.nber.org/reporter/summer99/eaton.html>. [Accessed on 25th December 2015].

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