Economic Overview In Auto Industry Essay

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Economic Overview of the Automotive Industry

The automotive industry is without a doubt an industry that has massive implications relating to the United States economy as well as affecting every American household. Shifts in the supply and demand of automobiles influence the current and future household purchases. Households must determine what amount of their hard-earned income to allocate to certain necessities. Because most households have a budget, the amount spent on transportation it limited. While most industries have an effect on the economy, the automotive industry has far-reaching implications for most Americans. Not only are the workers affected but the many spin-off jobs created as well as the consumers that must
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Few American households live without some form of transportation. The amount of money spent on the transportation proves whether the automobile is a necessity or a luxury. Higher priced models sell more when the economy is stronger. When the economy is slow lower cost cars are more popular. Transportation as a whole is a necessity. The form of the transportation is what determines if it is a luxury. (Collier, 1981) The fluctuations in the supply and demand of automobiles have an effect on other industries. One such industry that is affected in a measurable way is the after-market automobile parts industry. When the demand for new automobiles is high the demand for after-market parts is lower. When the demand for new automobiles is low the demand for after-market parts rises. The only explanation is uncovered when looking at individual households. Individual households have a limited amount of money to budget for transportation. If new cars are in high demand the income is higher for individual households. If new cars are not in high demand individual households have less money to budget for transportation. With less money to budget for transportation, individuals are more likely to use after-market parts to make repairs on their existing vehicle rather than purchase a new vehicle when their current vehicle needs costly repairs. The cost to repair a vehicle is far less than the cost to purchase a new vehicle. (Lamonica,
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