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Impact of factors on industry

Providing a full explanation for your answers, and using a country of your choice for illustration, discuss which firms are likely to gain and which firms are likely to lose from:

(i) An aging population;
(ii) An increase in the number of people going to University;
(iii) An influx of new immigrants.

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For this illustration I will use the United States. The situations involved here will affect both demand for various goods and changes in the labor force. Those industries that experience an increase in demand will do better, but in some cases this will be counterbalanced by changes in the labor force. However if demand is great enough, we can assume that the firm can increase wages sufficiently to attract workers while still increasing revenues. The firms in any developed nation would likely experience similar effects from these situations.

An aging population will benefit those firms which provide goods and services for the elderly. Such things could be healthcare, pharmaceuticals, and nursing homes. These firms will face and increased demand for their product, which will enable them to increase prices. As advances in medicine have resulted in longer lifespans, we are already seeing the effects of pricing on this industries. Nursing homes are often necessary because elderly people often find themselves living alone. As they grow increasingly frail, they cannot manage basic tasks and must have assistance.

At the same time, all firms will be facing increasing retirements with fewer workers to take the place of those leaving. This may drive up wages for those workers who are the hardest to replace. Those industries which are labor intensive may find it difficult to remain in business. The firms which will be most affected are those that provide goods and services to younger people. These industries will be faced with declining revenue at the same time wage rates are increasing. Services such as daycare and goods that require physical agility, such as skis and bicycles, will experience declines in demand.

In the long run an aging population means a smaller population. This can result in economic decline, as economic growth is dependent to some degree on population growth. All firms will see ...

Solution Summary

How various scenarios will affect different firms.

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