Effects of the Internet on the Global Economy Essay

4628 Words Oct 27th, 2007 19 Pages
Effects of the Internet on the Global Economy

Introduction
It is all about being connected. Throughout the ages being connected has allowed for the economy to grow. The modes of transportation connected the ancient worlds and individual economies grew or dwindled depending on the effectiveness of transportation. Most economic strongholds were on the waterfronts. Shipping was the main mode of transportation. This shifted from the advent of the steam engine. The era of the rail transportation allowed for economic centers to shift and permitted countries to be connected nationally and internationally. Again the economy has entered a new era of being connected by the Internet. "According to the record books, not since the Industrial
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Companies were taking advantage of the reduction in labor costs by shifting operations to many foreign countries including India and the Far East. This outsourcing also reduced the need for space, equipment/materials and labor as mentioned above. This article reveals some of the economic benefits from the Internet and the dramatic reduction of the overall cost of transactions.

Price Elasticity due to the Internet
Reduction of production cost allows the retailer to provide products and services at a lower price. The lower price allows more consumers to purchase more products and services. The Internet has also opened up many "niche" products to a wider consumer group of buyers, which was not available before this internet-based consumerism existed. Consequently, many consumers save both time and money by having this access as well as companies providing a more efficient delivery of services. The opportunity cost is ultimately realized by the consumer and drives future transactions before purchasing a given product or service.

Expanding the availability of products – Long Tail theory
The "long tail" theory is that products with low volumes or low sales can make up the market shares that may be equal to or exceed the sales of other items, if the store or distribution conduit is large enough. Some products that were scarce and only found in regional locations were now made available…