Hello, I need assistance with the assignment below, I tried to upload an attachment but it isn't letting me. Please check for plagiarism prior to sending it to me, also please accept only if you can s

ECONOMIC EVENTS AND ECONOMIC CONCENTRATION

IMPACT OF ECONOMIC EVENTS AND ECONOMIC CONCENTRATION

Fabiola Cabrera

University of Phoenix

1-ECOCB/535: The Digital Economy

Dr. Mohammed Miah

Part 1: Economic events and activity analysis

Impact of the 1973 oil embargo

The Organization of Arab Petroleum Exporting Countries (OAPEC) was started in 1973 after the U.S. supported Israel in the Yom Kippur War. It was accompanied by serious economic difficulties in the U.S. due to an increase in oil prices, therefore affecting the equilibrium of demand and supply. There was a sudden reduction in oil supply due to high prices between 1973 and 1974 (Zulkifli & Haqeem, 2022). This directly affected the cost of production as most of the machinery depended on petroleum products. The cost of transporting raw materials and finished products also went up due to limited supply. Due to limited supply, the demand for oil products over time declined as consumers went for alternative options. This affected the economic equilibrium as the aggregate supply curve changed due to the high cost of production and low output. It was accompanied by high inflation, unemployment, and stagnant economic growth in the country.

Employment dropped due to the 2006 housing bubble burst and the Great Recession.

Due to the burst of the housing bubble in 2006, followed by the Great Recession, there was a sudden drop in employment. It also affected supply and demand in the country. There was a steep decline in demand for houses due to oversupply, which led to a drop in prices. Banks tightened their lending standards due to the financial crisis, which affected credit demand by businesses and consumers (Garriga & Hedlund, 2020). Businesses failed to expand while minimal investments were made, therefore resulting in low economic growth. This led to job losses in the construction industry and banking, which reduced people’s spending power. Companies were forced to reduce product prices while the federal government lowered interest rates.

Impact of interest rates imposed by Federal Reserve

Due to challenges faced by the U.S. economy, the Federal Reserve introduced more interest rates with the aim of controlling inflation, which impacted supply, demand, and economic equilibrium in the country. Due to high interest rates, there was a decline in investments as businesses faced high financing costs (Swanson, 2021). It also led to low production since businesses could not invest in new technology. Customers were also affected by borrowing costs, which led to low purchasing power; therefore, the demand for major purchases such as houses and cars declined rapidly. The economic equilibrium was affected as the nation experienced lower economic activities therefore increasing unemployment in the country. It was also accompanied by a higher inflation rate in the early 1980s.

Impact of the Collapse of the Soviet Union in 1991

The collapse of the Soviet Union in 1991 led to major economic changes in the world due to the reduction of resources that were spent on funding the military. There was an increase in construction in the defense industry (Ellman & Kontorovich, 2023). Various industries benefited as they expanded operations and developed different products. This led to an increase in employment opportunities, therefore increasing customers’ spending power. Due to demand, which resulted from increasing purchasing power, companies focused on increasing product supply, therefore improving all sectors of the economy.

Impact of Dot-com bubble (1994-2000)

The period was characterized by the rapid development of the Internet, which was accompanied by the rise of new companies and the fall of others. New employment opportunities were created while new investments were made. There was increased demand for computer software and hardware; therefore, companies increased production to ensure enough product supplies (Zhukov, 2022). In terms of economic equilibrium, there was an unsustainable economic environment as a result of the 2000 bubble burst, which was accompanied by a decline in stock prices and led to financial losses for investors.

Part 2: Economic Concentration Evaluation of Silicon Valley

Influence of competition and pricing in Silicon Valley

Silicon Valley’s economic development has been propelled by competition between various companies and product price dynamics, therefore leading to an innovative environment, improved business activities, and overall economic growth in the region (Kwon & Sorenson, 2023). Companies are always competing to develop better products that meet customer demands; therefore, they are forced to compete for talented individuals who can propel the companies’ innovation. They have also invested enough resources in training workers to improve their skills. This also includes paying them high wages and other benefits to prevent them from working for competing companies. Companies in Silicon have been forced to seek capital funding to invest in new technology and improvement of their products due to the competitive environment. Competition has also led to the development of a collaborative ecosystem whereby companies with good relationships share knowledge and partner to achieve common goals. This has led to more investment in technology development in the region.

Pricing is also a key factor in the region whereby companies offer customers competitive pricing to increase their market (Tikhonov & Zelentsova, 2021). This has led to affordable products and services for both consumers and other businesses. The market has widened because of this factor as people and businesses have adopted technological products from the region, which makes them keep on purchasing updated product versions. Due to competitive pricing, companies are always searching for new ways of reducing the cost of production to gain maximum profits from final products, therefore promoting economies of scale.

Influence on supply chain

Due to demand for various technological products in Silicon Valley, companies have targeted global sourcing of products that are adopted to the latest technology and products which are cost effective therefore improving profits (Kwon & Sorenson, 2023). Most of them have outsourced manufacturing of some of their products in other countries which have lower labor cost such as Taiwan therefore reducing the cost of production. This gives them a competitive advantage against their competitors as they can sell their products at lower prices.

The supply of various technological components is done when needed, which has reduced inventory costs for the companies. It has also enabled companies to make adjustments to their products based on customers’ needs. Most companies have also adopted supply chain management software to optimize the supply chain and also to improve decision-making processes. The world can be affected by risky factors such as war or natural disasters. To ensure that the supply chain can be depended on, the companies have diversified product sourcing whereby they have suppliers from all parts of the world in case a region is affected.

Factors of production analysis

Entrepreneurship is the most important factor in determining the economic concentration of Silicon Valley. There is a culture that encourages the starting of new technological businesses in the region whereby risk-takers such as Steve Jobs have been attracted to conduct business in the region. There is also a business ecosystem in the region due to network opportunities and a culture that encourages trial as a method of learning new innovative ways of operating businesses. Capital is another important factor of production, whereby investors are willing to invest large sums of capital to introduce new technology businesses and expand. Labor is also an important factor, as the area attracts a highly skilled labor force. This includes highly skilled engineers, business professionals, and scientists who support progressive innovation in the companies (Malone, 2021). Land is the least important factor of production in the area since land is very expensive in the region, therefore preventing some of the investors from investing in the region. The land is not only used by business institutions but also by learning institutions such as universities; therefore, it is too limited.

Prediction of changes in Silicon Valley

Factors such as COVID-19 accelerated remote working environment. This can be a significant step towards solving land-related problems as businesses will require minimal physical offices since their workers can work remotely. Many businesses in the region will use technology to enable their workers to work remotely. Most of the companies in Silicon Valley will invest in environmentally friendly measures such as the use of renewable energy due to sustainable policies that have been put in place. Due to the continuous improvement of AI, most companies will adopt it in their production processes and also in marketing analysis (Venkatesh, 2022). The majority have already started, but it is expected that they will increase the use of AI in the future.

References:

Ellman, M., & Kontorovich, V. (Eds.). (2023). The disintegration of the Soviet economic system (Vol. 3). Taylor & Francis.

Garriga, C., & Hedlund, A. (2020). Mortgage debt, consumption, and illiquid housing markets in the great recession. American Economic Review, 110(6), 1603-1634.

Kwon, D., & Sorenson, O. (2023). The Silicon Valley syndrome. Entrepreneurship Theory and Practice, 47(2), 344-368.

Malone, M. S. (2021). The big score: the billion-dollar story of Silicon Valley. Stripe Press.

Swanson, E. T. (2021). Measuring the effects of Federal Reserve forward guidance and asset purchases on financial markets. Journal of Monetary Economics, pp. 118, 32–53.

Tikhonov, A., & Zelentsova, L. (2021). Analysis of External and Internal Factors of Business Competitiveness. Quality-Access to Success, 22(182).

Venkatesh, V. (2022). Adoption and use of AI tools: a research agenda grounded in UTAUT. Annals of Operations Research, 308(1), 641-652.

Zhukov, P. E. (2022, April). Impact factors of the digital economy on economic growth. In Proceedings of the International Conference Engineering Innovations and Sustainable Development (pp. 595-601). Cham: Springer International Publishing.

Zulkifli, N., & Haqeem, D. (2022). The Opec Oil Shock Crisis (1973): An Analysis. Asian Journal of Research in Business and Management, 4(1), 136-148.