Economic Overview of the Automotive Industry The automotive industry is undoubtedly an industry that has enormous implications relating to the United States economy and affects every American family. Changes in the supply and demand for automobiles influence current and future household purchases. Families must determine how much of their hard-earned income to allocate to certain needs. Since most families have a limited budget, the amount spent on transportation is limited. While most industries have an effect on the economy, the automotive industry has far-reaching implications for most Americans. Not only are workers affected, but also the numerous jobs created, as well as consumers who have to purchase the cars produced. The automotive industry is considered elastic. Prices vary depending on supply and demand. For example, when the economy suffers a recession and car sales decline, automakers attach incentives to purchase new vehicles to stimulate sales such as interest-free loans, rebates, and reduced prices to encourage Americans to purchase their goods . Replacements are available in the foreign automotive market. Lower-cost, more fuel-efficient models are available from many foreign automakers. Politicians have placed limits on the amount of foreign cars that can be sold in the United States, but in recent years the demand is higher, so politicians must respond to that demand. Past statistics tell the story of when fuel prices rise, smaller, more fuel-efficient cars are more in demand. Rising fuel prices push households to reallocate money from other areas to purchase fuel at higher prices because fuel is needed for transportation to and from work. When fuel p...... middle of paper ...... lopment far surpasses any other industry in the United States. (McAlinden et al., 2003) There is no doubt that the United States is highly dependent on the automotive industry. The economy has always responded to fluctuations in the auto industry just as the auto industry responds to the economy. The future of the United States economy depends on the auto industry, and with the population encouraging more fuel-efficient and less polluting transportation, the future of the auto industry will likely respond to those demands. The environment will likely become a growing concern for the automotive industry. The effects of the shift towards a more environmentally friendly auto industry have yet to be seen, but I can assure you that all American families, as well as the US government and other countries, will be watching..