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Economics Article Analysis: Ford, GM Team Up on New Transmission

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Introduction

I.B. Economics S.L.II ... "Ford, GM Team Up on New Transmission." As the two largest car producers in the world, General Motors and Ford are the leading manufacturers in a market section functioning as an oligopoly. Since there's a limited number of successful car manufacturers, the actions of one will have measurable impact on competitors. Instead of competing against each other, the joining of these companies to develop a new six-speed automatic transmission will have considerable influence on the automobile economy. Both powerful and thriving producers, this team will be one that will rival other producers of the same goods. ...read more.

Middle

With improved technology, the demand for automobiles produced by these two companies will increase, and the demand curve will shift to the right (graph 1). This shift will allow GM and Ford to charge a higher price for their products while still experiencing equilibrium between the supply and demand curves. The other companies, that have not merged, and are not working on this new six-speed automatic transmission, will experience a decrease in demand. Their demand curve will shift to the left (graph 2). This will cause the price for such products to decrease, and in the long run, these companies will lose out to Ford and GM. ...read more.

Conclusion

This would also increase the price of the country's own domestic products while still maintaining equilibrium. If a tariff were to be imposed on imported automobiles from the U.S. then such cars would be increased in price for consumers in that country and so would be demanded less (graph 4). The imports wouldn't fulfill the demands of the country, and so domestic production would satisfy the consumers' wants. This union will be a prosperous one for G.M. and Ford, although it may cause increased competition and protection in foreign automobile markets. Article: " Ford, GM Team Up on New Transmission", Yahoo! News Website, http://news.yahoo.com/news?tmpl=story2&cid=509&ncid=1189&e.../gm_ford_transmission , October 10th 2002. Word Count: ...read more.

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