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Market Trends:Productivity, Wages & Price Elasticity of Demand

Describe the market trends that a Auto Industry will face. Explain your conclusions. Address how each of the following will or will not change, and why:

Productivity: Consider the law of diminishing marginal productivity
Cost structure

o Wages and benefits
o Fixed and variable costs

Price elasticity of demand
Effect of government regulations.

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Market Trends in the Auto Industry
The auto industry is one of the most global industries, and this characteristic make it susceptible to minute changes in the industry's productivity, cost structure including wages and benefits, and fixed and variable costs, price elasticity of demand, and effect of government regulations. What this means is that changes in these factors can significant impact the long term financial and economic sustainability of the industry.
Changes in the productivity of industry players and the industry as a whole will significantly impact the market trends in the automobile sector. This fact can be demonstrated by the Japanese cars outperforming their American and European equivalents. Hoppmann, Rebentisch, Dombrowski, and Zahn (2011) found out that Japanese auto manufacturers outperformed their competitors with regard to engineering hours and lead time. This better performance allows Japanese car companies to produce products more suited to the demands - existing and future - of the market which has propelled Toyota and Honda for example ahead of General Motors, Ford and Volkswagen.
Improvements in ...

Solution Summary

The solution determines productivity, wages and price elasticity of demand.