What is the effect of new technology on firms in the industry in the short run?

Question

What is the effect of new technology on firms in the industry in the short run?
What is the effect of new technology on firms in the industry in the long run?
What is the effect of the new technology on consumers? Does that change from the short run to the long run?
What is the effect of the new technology on the greater society in the short run and the long run?


My example is cell phones.I believe the effect of new technology on consumers is that it makes life easier for society. Cell phones have become miniature computers that can do just about anything we want now. Our cell phone for the past few years have a lot more processing power than there was on the Apollo 13 that went to the moon. People will always want the best in technology, all might not get when they want, but they will always want to be in communication with friends and family and do what ever they do on the internet with their phones. So for the majority of consumers i don't think it changes, they want the new technology as soon as they can get it, while a lot of people will wait to make sure the bugs are out of the phones.

Explanation / Answer

In the short-run, increases (decreases) in demand in a competitive market will cause prices and output to increase (decrease). In the long-run, increases (decreases) in demand in a competitive market will cause increases (decreases) in output. Initially, markets with an increase (decrease) in demand will have firms experiencing economic profits (losses). Over time, markets with firms experiencing economic profits (losses) will have additional firms enter (existing firms will exit) the market, and prices will decrease (increase) towards previous levels. If cost conditions remain the same, then prices will revert to what they were before the increase (decrease) in demand. If the market price falls below a firm's average total cost, the firm will incur economic losses. The firm may be able to lower its average total cost by changing to a different plant size. Suppose a firm increases its plant size, and lowers its average total costs. If other firms follow, then the industry supply curve will shift to the right. This will result in lower prices and less economic profit. If a firm does not expect market conditions to improve then it may decide to go out of business. This would be the preferred option as, by selling out, neither fixed nor variable costs would be incurred. Impact From Changes in Technology The impact of a permanent change of demand on price and output for a market will be influenced by the cost structure of suppliers in the market. The long-run market supply curve in a competitive industry will depend on the returns to scale. For a constant-cost industry, if demand increases, then firms temporarily will make a profit as price will go above the minimum needed for the firms to stay in business. This will cause firms to expand output or new firms to enter the industry. Because costs are constant in the long run, the long-run supply curve will be horizontal. In the graph below, as demand shifts from D1 to D2, over the long run quantity will increase from Q1 to Q2. However, price will remain the same. For a decreasing cost industry, if demand increases, in the long run firms can provide more output at lower prices. The need to produce larger quantities of goods and services in response to increased demand induces technological change, which lowers costs for the producer and these savings are passed on to consumers in the long ru

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