Question

Lidar, for light detection and ranging, emits invisible laser beams that capture the light reflected from distant objects. Lidar acts as the “eyes” in self-driving cars. More companies, such as Google and Nissan, have been installing lidar in their self-driving cars, increasing the quantity of lidar systems sold. Once costing about $85,000, lidar systems prices have been steadily decreasing. Which of the answer choices best explains these occurrences in the lidar market?

a. The U.S. Federal Government’s Office of Science and Technology has been increasing its research and development (R&D) tax rebates into the development of lidar. R&D tax rebates lower the overall tax rates that lidar makers pay.

b. Over the past decade, the lidar market has consolidated. Several years ago, there were no fewer than 20 firms producing lidar systems. Today, two firms—Velodyne and Ibeo—control approximately 65% of the lidar market.

c. To increase self-driving car production, the U.S. Department of Transportation has recently granted liability waivers for self-driving car makers. These exemptions from regulatory rules have prompted self-driving car makers to increase their purchases of lidar systems.

d. A lidar system consists of lasers mounted throughout a self-driving car. Independent research shows that for safe operation there must be at least 64 different lasers, not 32, as claimed by lidar makers. As a result, lidar system buyers anticipate that the prices of lidar systems will be higher, not lower, in the future.

Answer 1

1. One of the determinants of demand for a commodity is government policy towards that particular product or industry. If the government incurs more expenditure on research and creates an awareness about the positive effects of lidar use then there is a likely hood that it could generate more positive response from the consumers.

An analysis of the other possibilities:

The two companies that control 65% of the market shows that lidar usage has been increasing over the years. It could also mean that these two companies are accruing the benefits of lower per unit costs since they are able to produce lidar in bulk. Hence, they are able to supply them at competitive prices.

The two companies that control 65% of the market shows that lidar usage has been increasing over the years. It could also mean that these two companies are accruing the benefits of lower per unit costs since they are able to produce lidar in bulk. Hence, they are able to supply them at competitive prices. The US transportation department’s granting liability waivers for self-driven cars is also an encouraging sign for increasing awareness about self driven cars and usage of lidars.

The lidar buyers’ anticipation of a future price rise is also one of the determinants of demand for a commodity, in anticipation of rising costs and higher prices buyers may desire to buy the commodity at the existing price itself.