MIEC TB05 GROUP 4 by Daphne Heng

Eg. 2: Growing demand for robotic cleaning products

christinengjy — 2016-11-19 19:00:38 UTC

Artificial Intelligence (AI) wiping out jobs

christinengjy — 2016-11-19 19:24:01 UTC

In recent years, the tech industry has been infiltrating into our daily lives at an accelerating rate. All kinds of routine jobs (eg. manufacturing industry) have become automated over the past few years thanks to breakthroughs in technology.

Businesses have long embraced automation because it lowers their cost of production and improves profits. In addition, robots are proven to be highly efficient and error-free. As far as that's concerned, the rise in digital technologies have led to the eradication of menial labour (especially blue-collared jobs).

Also, globalisation is making it easier for companies to relocate and outsource overseas (in developing nations like India, China, Vietnam, Cambodia etc) , where wages are lower and regulations are less stringent.

"The World Economic Forum has estimated that five millions jobs will be lost by 2020. A 2013 Oxford study estimated that 47% of U.S. employment is at risk of being computerized. Economist Lawrence Summers, the former Treasury secretary, expects that more than one in three men in their prime working years will be out of work in 2050."

With that being said, unemployment rates are definitely on the rise.
Type of unemployment: Structural unemployment; whereby human skills become obsolete.

Consequences:
- Lowered/ lack of disposable income
- Consumers' ability to purchase goods will drop as a result (spending power drops)
- Falling real incomes and a widening of inequality/disparity of income and wealth
- Fiscal policy: government receives a fall in tax revenues and devotes higher spending on unemployment welfare costs. This can possibly result in an increase in the budget deficit which then increases the risk that the government will have to raise taxation or scale back plans for public spending on public and merit goods.

Determinants of Demand (TEN PM) affected:
1. Money income
- with unemployment on the rise, a decrease in money will result in a decrease in the demand for normal goods
- demand curve for normal goods shifts left

- related goods: decrease in money income leads to a subsequent increase in the demand for inferior goods
- demand curve for inferior goods shifts right

Human labour will never be cheaper as we get more advanced.
Solution:
- Lifelong learning is the key to survival
- Constant upgrading of skill set and widening your knowledge is required to ensure that you will not be replaced by machineries
- Retraining, reskilling
- Government to regulate and lift standards of the local private education sector
- Push towards a more efficient workforce, more on R&D technology, and less focus on blue-collared, labour intensive jobs
- Examples include: SkillsFuture, Earn and Learn programme, WDA --> helps workers to thrive amidst technological changes and globalisation
- Providing unemployment benefits (not recommended)

Eg. 1: Uber pushing for self-driving cars

christinengjy — 2016-11-19 19:26:26 UTC

christinengjy — 2016-11-19 19:28:05 UTC

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christinengjy — 2016-11-19 19:35:45 UTC

Use as reference!

(Outdated)

dapzx — 2016-11-19 21:15:11 UTC

Reference

Eg. 3: McDonalds introducing self-ordering kiosks and robotic table service

dapzx — 2016-11-19 21:20:51 UTC

Effects of Automation

bryanhuan99 — 2016-11-20 07:29:56 UTC

With the advent of automation, the instability of people's job just got greater.

Technological advancements will definitely benefit the bosses of companies as they will be able to cut down on their costs by a tremendous amount using automation instead of hiring workers. The total variable cost of using for example, electricity for the machinery would be cheaper than the total variable cost of paying wages to workers. Thus, total cost would be reduced if factories were to use automation.

Not only that, with greater technological advancements, factories are able to produce more using less resources, causing an rightwards shift in the supply curve, as there is an increase in quantity supplied, producers are willing and able to sell more at cheaper prices. causing a drop in prices of the product which can be a good thing for consumers.

The article also states that the government can save up to £12 billion in public sector wages by 2030 which can be put to good use in order sectors such as health or education.

However, there are two sides to every coin and with people who benefit comes people who will be disadvantaged from the technological advancements. People that take up jobs that are easy labor or easy to execute runs the risk of having their jobs replaced by automation. Even though prices may get cheaper and they may receive better healthcare and such, they might not be able to afford them as their money income may remain the same or they have lost their jobs.

Learning new skills to stay ahead of the curve

christinengjy — 2016-11-20 07:38:07 UTC

"The reality of today's work environment is that no one is irreplaceable."

Pros of technology advancement

christinengjy — 2016-11-20 08:21:41 UTC

Technology is a double-edged sword. The following takes into account the pros of technology advancement:

- increased efficiency in workforce and production of goods
- radically improved performance
- fewer resources (mainly labour & capital) are needed for the production of a certain good
- while it phases out menial labour, there is also creation of new, higher-skilled jobs, generating new industries and products

- affects the elasticity of supply in certain industries, makes goods and services more elastic
- in the event of an increase in price, output is also increased by a greater factor because producers is able to produce more for a smaller price input
- maximised profit, benefits producers in the market

- lower cost of production implies that at every price, suppliers are able & willing to sell more
- or it could mean sellers are more able and willing to sell at a lower price at every quantity

Supply increase, rightward shift of supply curve.
Determinant of supply: Technology

With improved technology, PPF curve can also shift to the right (unattainable area). Meaning that we have the capacity to produce more goods.

A surge in the demand for Service Robots

jasondreyes — 2016-11-20 20:57:01 UTC

Service robots are the hype amongst those who require for domestic and personal usage.

Such robots are capable of performing many tasks or chores. i.e. Cleaning of windows or mowing of the lawn. Having to possess such skills would decrease the demand for many cleaning equipment (such as a lawn mower) as the robot can do the job while also perform other tasks which is programmed to do.

(cont) a surge in the demand for Service Robots

dapzx — 2017-01-01 18:04:18 UTC

The constant advancement in technology has finally brought the human race to its next evolution, using robots to do our work. Several companies have come out with their very own version of service robots, for example, in this article, Honda Motors demonstrated its Asimo robot during a media preview of the 2014 New York International Auto Show in New York. Another example would be the Ecovacs Deebot Robot Vacuum Cleaner, which aids the user in cleaning up their households, or generally anything they want.

Robots are meant to make our lives easier, but with that, it usually comes with a price.

Service robots are no stranger to the human race, going as early as 2001, Roomba, a robotic vacuum cleaner, was first released in 2002 by the company iRobot. However, the demand for service robots has gradually increased.

A statement made by the International Federation of Robotics claimed that the global turnover of service robots—which include robots that can mow the lawn or clean windows—is now forecast to increase to about $46 billion in the 2016-2019 period, compared with about $7 billion in 2015. The huge difference of $46 and $7 billion speaks to the high demand of the said product in the near future.

Relating to what we have learnt in Microeconomics, the law of Demand states that an inverse relationship exists between the price of a good and the quantity demanded of the good, ceteris paribus - in other words, with the surge in demand for service robots, we may expect the price of such products to drop from its hefty prices, which will cause the demand curve to shift rightwards, the determinant being the increase of number of buyers in the market.

With that being said arises another concerning factor that we should all worry about: with such high demand for service robots, is there a chance of robots taking over the working race, and how will this impact the economy?

In my opinion, yes, with the increase of production in service robots, companies and employers will definitely invest in such products as means to cut cost in production and salaries expenses, ultimately saving money for the company, and looking forward to higher and faster production rates. The economy can expect a higher rate of supply during this period, and expect prices to drop lower as well. This is contributed by the one of the determinant of supply, advancement in technology.

However, while the drop in hefty prices may sound like a dream to us, on the other side of the coin, with the increase usage of such intelligence, the human price has to pay a price for such efficiency and luxury - their jobs. Robots can replace the effort that a human can produce easily, and many companies may see human resource as a extra spending wastage in company funds and hence retrench them.

This may possibility lead to an undesirable
outcome where the salaries of the affected parties drop significantly, and due to the expectation of future prices of their income, the demand for any other services or product may drop significantly due to their inability to purchase.

How much the economy will drop or increase is unforeseen, but to reach a healthy level of increase and decrease, one should control the usage of such service robots.

Consumers' Attitudes About Household Robots

jasondreyes — 2017-01-02 13:46:59 UTC

Elasticity

jasondreyes — 2017-01-02 14:26:30 UTC

Income Elasticity

Service robots in general are income elastic as they can be considered both a luxury and normal good.

They are said to be a luxury good as it is not a must for commoners to purchase these robots. Rather, they can sought to economical alternatives such as smartphones or a normal vacuum cleaner. They are also considered a normal good as an increase in consumers' income will cause an increase in demand for service robots.

Income elasticity helps sellers predict the growth rate of demand for their goods and services as consumers' income changes. This enables sellers to adjust their output in anticipation of any changes in a consumers' income. Since service robots are price elastic, commoners would consider to purchase these robots if they were to have a higher real income. Thus, such robots remain as a desire and not a need.

Price Elasticity of Demand

Demand for service robots is price elastic and this can be justified by the determinants of price elasticity.

(a) Availability of substitutes in consumption

There are many direct substitutes available to consumers such as normal lawn mowers and vacuum cleaners. They are available to consumers at departmental stores easily and thus, with more substitutes available, the more price elastic service robots will be as consumers will not resort to buying the alternatives.

(b) Proportion of Income Spent

Since service robots are sold at sky-high prices, a great proportion of a consumer's income will be spent on robots.

(c) Necessity against luxury

As mentioned earlier on, service robots are considered as a luxury and thus the demand for service robots will be price elastic.

Consumers of these service robots are very responsive to the change in prices of such goods. With reference to the midpoint price elasticity formula, the percentage change in quantity demanded of the robots would be higher than the percentage in prices. Thus, the absolute coefficient of price elasticity of demand would be higher than 1, and hence when plotted, the demand curve would be a gentle slope.

Also, service robots are widely used in the world. In this article, robots are mainly used to assist consumers to complete household chores. Though it may serve consumers at a great convenience, the price that comes along with it may tarnish one's idea to purchase the robot. However, if the price of service robots plummets in the future, consumers would definitely consider to purchase them and suppliers would look forward to produce greater quantities of such robots. Therefore, the demand for these robots would then increase greatly.

Rather interesting articles especially the one on robots and tech which serves as updating knowledge. However you would

lhw2 — 2017-01-04 08:20:30 UTC

need to use MIEC concepts to apply eg, the use of robots will result in mass production , reduces cost (lowering of ATC arising from economies of scale) and hence increase profit, along this line of analysis. the application of employment issue is more Maec concept.
In addition it would be helpful if you can research and look for articles /evidence if the robotic industry belong to which particular market structure (I suspect it coul b oligopolistic) but then again I do not have the evidence. Please help to look for evidence of market structure . It would be interesting to know more details about the industry and if you can apply market structures. Please proceedwith the report writing using these articles. If you need to use and research for info from more than the 3 chosen articles , please proceed to do so and then declare these additional sources of info as "reference" in the report.

lhw2 — 2017-01-04 08:25:56 UTC

Good analysis Jason, keep up along this line for robots)

An increasing demand for service robots

jasondreyes — 2017-01-29 19:11:47 UTC

bryanhuan99 — 2017-01-29 19:57:03 UTC

christinengjy — 2017-01-30 07:16:20 UTC