Question

Please list and discuss the roles played by the concept of new technology as it relates to the decision to build factory #5: Even if sales volume is flat, profits are low, and interest rates are high, why would a firm desire to build factory #5, at least in theory?

Answer 1

                        The given situation represents the reasons for the economics behind the building of a factory. The introduction of newer technologies are always a boosting factor for the establishment of a factory in a market and the following are the reasons why the introduction of latest technologies would attract the building of an industry

· Innovations in technologies would ensure that the labour cost of building and maintenance in an economy is decreased and thus it would help in the establishment of the factory at a reduced initial investment

· The profit-making capability of the firm would be higher if it makes use of latest technologies and thus in the process the growth of the factory would be higher.

· Employee training is an important part of a factory and contributes to much cost of the same. The new innovative technological practices may result in the reduction of the same.

· The efficiency of production would be improved in the longer run as the innovative technologies would introduce new methods of production that would help in the same.

· Building an industry is a laborious task and the new technologies would help in reducing the time of expansion.

Even at times when the sales volume is flat, profits are low and the interest rates are high, the building process of a factory would be undertaken due to the following reasons

· Even at lower profits, the long-term effective building and action plans could make sure that the firm could reap gains in the future and hence building a factory would be undertaken with this motive.

· The interest rates in an economy would be ever fluctuating and an increased interest rate in the current scenario would not mean that the same would remain at all times and hence the current process may be done with the possibility of a brighter future ahead.

· At flat sales volume, it is difficult to make profits, but with the help of technology and innovation, the same can be dealt with and hence the effects of decline in the sales volume could be reduced in the process.

Thus, the above reasons suggests that even at hard times, building a firm is always an investment in an economy and hence the process would be undertaken.