Question

Use the following markets to analyze: Driverless Cars

Identify the market in question i.e. who are the buyers and sellers. Analyze the five demand ceterus parabus conditions and the five supply ceterus parabus conditions. Give a specific hypothetical example for each condition that results in an increases or a decrease. For example if the market were video games, an increase in the salaries of graphic designers would cause the supply of video games to decrease.

Answer 1

Buyers: Families and individuals using cars to get to work

Aellers: Automobile companies

Five ceteris paribus demand conditions:

• Increase in consumer incomes would increase demand for driverless cars
• Increase in wage rates of chauffeurs would increase demand for driverless cars
• Increase in awareness among people on the benefits of not driving and taking rest while going to work would increase demand for driverless cars
• An increase in the number of road accidents due to driverless cars would lead to decrease in demand for driverless cars
• Increase in price of regular cars would increase demand for technologically advanced driverless cars

Five ceteris paribus supply conditions:

• Increase in wages of engineers working on developing driverless cars would reduce supply of these cars
• Increase in cost of producing AI for driverless cars would reduce supply of these cars
• Government regulation against production of driverless cars due to their possibilities of causing road accidents would reduce production and supply of driverless cars
• Increase in entry of more automobile producing companies in the field of driverless cars would increase production and supply of driverless cars
• Future expectations of increase in prices of driverless cars would reduce production and supply of driverless cars in present today

These are the factors that would affect demand and supply of driverless cars in the economy.