Answer to Question #87100 in Macroeconomics for Oumea

Question

A significant improvement in auto technology will

Answer 1

Significant improvement in automotive technology plays a significant role in the economy as a whole. Consideration of this event must be done in two aspects. First, cars as goods and, accordingly, the car market. Secondly, motor transport as a means of delivery and transportation of goods from other goods.

Economics defines new technologies as a kind of non-price determinants of supply of a certain type of goods, leading to an increase in supply, ceteris paribus. Despite the fact that the unit of the new improved car model will cost more than the old model, the demand for new models will not decrease. 

This is explained by the fact that, with the right marketing policy, the consumer will be much more interesting than a more technologically advanced car with a larger "stuffing" and having more utility than its predecessor. In addition, in some cases, the effect of Veblen will manifest itself, when purchasing a technologically advanced and expensive product is a way to emphasize your social status. Thus, the market equilibrium point will shift to the right-up.

The second aspect will certainly be positively reflected on the market conjuncture of various types of goods, overcoming the transportation costs barrier, i.e. reducing the cost and time of transportation. For example, in order to transfer a load of 30 tons from city A to city B, a modern truck tractor will take much less time than its predecessor from, say, the 70s.