Impact of Subsidies on Technology Adoption
Imagine a market where the adoption of a new, more sustainable technology is influenced by the number of current users. The adoption pattern is such that it starts slowly, then accelerates rapidly after reaching a critical mass of users. If the government introduces a significant, permanent subsidy that makes this new technology cheaper at all levels of adoption, what are the two primary effects on the market's trajectory towards this new technology becoming dominant?
0
1
Tags
Economics
Economy
Introduction to Macroeconomics Course
Ch.8 Economic dynamics: Financial and environmental crises - The Economy 2.0 Macroeconomics @ CORE Econ
The Economy 2.0 Macroeconomics @ CORE Econ
CORE Econ
Social Science
Empirical Science
Science
Application in Bloom's Taxonomy
Cognitive Psychology
Psychology
Related
Figure 8.33: Effects of an Upward Shift in the Adoption Dynamics Curve
Consider a market for vehicles where the relationship between the current share of electric vehicles (EVs) and the share in the next period follows an S-shaped curve. Now, suppose a series of events—such as significant improvements in battery technology and a strong cultural shift favoring sustainability—causes the share of EVs in the next period to be consistently higher for any given level of current EV ownership. What are the two most likely consequences of this change on the market's long-term trajectory?
Evaluating EV Adoption Policies
Analyzing Market Shifts in Technology Adoption
Impact of Subsidies on Technology Adoption
Consider a market where the adoption of a new technology is represented by an S-shaped curve, plotting next period's adoption share against the current share. If factors like lower costs cause this curve to shift upwards, the market becomes more stable at its initial, low-adoption equilibrium point.