Question

How do those characteristics impact diffusion ?

Rising fossil fuel-based energy “costs”

Tight credit markets

low interest rates but slowly rising Investment spending

Rising public and private debt

Population increase

Growing income and wealth inequality

Answer 1

Diffusion is the trend or rate at which a new product or the idea of a new product replaces an old product in the market. It also indicates the rate at which the idea of a new product becomes popular or is spread among the consumers in the market. The gradual rand constant rise in the prices of the fossil fuel have prompted the various countries to regulate and control their fuel use . This has moved the extraction companies to find out the alternatives to the fossil fuels, and renewable energy is now a hot topic among the energy users and is gaining fast popularity and demand across the world. The rate of diffusion is gradual but constant.

When an economy is derailed from the path of development and economic growth hinders catch in , Tight credit market becomes an impediment. Tight credit market means, when the rate at which credit is available in the market is very high. i.e. the interest rates prevailing in the market are rigid are increasing. This is a tight situation where , the economy does not find any development. In such situation , diffusion is near impossible , as the market is already reeling with low economic growth . In such scenarios , a new product or a new good in the market would not gain much popularity , since the income or the purchasing power in the hands of the consumers would be minimum.

  When interest rates are low , this promotes diffusion , since the new product or the new good which would want to establish itself in the market would get funds easily available in the market to produce more of the quantities of the product at a considerable cheaper rate to compete against its rival products in the market. Even if the market is characterized by a slowly rising investment spending , diffusion would be positive , although not at a very fast pace. Diffusion would be high only when the spending on investment to create new products in maximized.

  Public and Private debt are indication of an economy which is slowly going under tremendous economic crisis. The lack of flow of funds, which would be a result of the rising the debt of the Government and the local people , would slowly drive out the investment from the market , when there is no new investment in the market , no new products would be available for the consumers, and hence diffusion would not exist. Diffusion can rise up only when we have investment available in the market which is characterized by low public and private debt. In the case of debt , the Government would not want t take the risk of promoting new products in its market ,also the consumer would not have the resources to spend on their choices.

Population increase adversely affects the diffusion of new products in the market. When population increases, the economy is burdened is more people to support than its capacity. This results in the Government implementing more programs to support the basic needs of the ever rising population and keeps aside the prospect of new entry of firms in the market. Although , it sometimes also has a positive effect in diffusion , as due to population increase, more people become consumers, which attract more investment from the investors , and new products also pop up. This results in diffusion rising and spreading.

  Income equality is a basic character of consumer demand , it is directly connected to the increasing or decreasing trend of the consumers demand. If there is growing trend of income or wealth inequality , some people in the market are deprived of their financial gains , and become poorer gradually. Although some people in the economy become richer and diffusion among them rises, however, a major chunk of the society gets poorer, going by the trends in the modern economy , where we see that money usually gets concentrated in the hands of a few , when income inequality rises. The poor people will seldom have the power to choose from a range of products. Therefore diffusion in the economy gradually dies down.