Congestion Auto: Conclusions and Recommendations

Congestion Auto: Conclusions and Recommendations
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Congestion Auto: Conclusions and recommendations
1 Conclusions
The improvement in economic performance of the country has led to a rise in the standards of living of most people. This improvement has seen an expansion of the middle-class who consider purchasing of items such as automobile as a necessity. Automobile firms have noted this high demand for automobiles among the people with a high level of disposable income and have kept on introducing into market different new models in order to keep the demand for automobiles high. This is a form of product differentiation which enables the firms as per the market theory to make a reasonable profit as people tend to like purchasing each new model of automobile that comes in the market. Notably, each firm in a perfectly competition such as the one in the automotive industry identifies a small population (market niche) which it tries to satisfy as well as maximize its profitability within this market at minimal costs. This is what is known as market perfection or optimization. The optimization of an automobile market ensures that a firm is able to enjoy economies of scale. According to Olavarrieta and Friedman (2008), in highly competitive markets, firms can imitate innovations such as copying vehicle model shapes from competing firms or even the sources of their competitive advantage, so as to have a same leverage in terms of cost and revenue. The high competition in the automotive industry has led to reduction of automobile prices, which has had its socio-economic impact. To begin with, there has been a high level of unprecedented congestion of vehicles on the roads that before. This is because, the rate at which consumers are buying vehicles does not correlate with the level of expansion of roads and parking spaces.
In reference to market size and reach, the central place theory identifies three major market layers, namely; large, medium and small, which is determined by the variety of goods that are present in each market. In the larger markets such as major cities such as Toronto, the level of congestion is high compared to medium cities and smaller cities in the upcountry. This means that, the smaller markets or cities have a low number of vehicles closely related to the lower number of people with high disposable income living in them. This explains the logic why consumer tends to move from one small market to another bigger one once they are after a wide variety of cars to buy. On the other hand, if the consumers are after a specific type of vehicle a smaller market provided that brand of auto is present.
Notably, there is a higher concentration of firms selling automobiles in larger markets compared to those in smaller markets. For ...