What are the microeconomic factors which affect the automobile industry?  

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pohnpei397 | College Teacher | (Level 3) Distinguished Educator

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There are many microeconomic factors which can affect the automobile industry.  We will examine two.

  • Price of oil/gas.  The price of oil affects what sorts of cars people want to buy.  As the price of oil has gone up, the demand for smaller cars has increased in the US.
  • Price of various inputs.  In the United States, the most visible of these inputs is labor.  The large automakers have recently been trying very hard to bring their labor costs down.  They gave extremely high compensation in union contracts in past decades and now feel that those contracts hurt them.  The price of labor, then, has an important impact on the auto industry.