Industries not Econmically Viable


No matter what products that are invented that better our human experience, they can never be fully enjoyed by the general public unless they are economically viable in the free market. While it seems that whatever we can imagine in our minds we can create, in order for us to benefit from it on a large scale basis, it must be able to be delivered to consumers at a price that makes them want to buy it. That’s obvious, right? Well, you would think so but the government sometimes fails to realize this and subsidizes companies involved in manufacturing products that would not survive in the free market, by cheating taxpayers with wasted funding. Even though our minds and imaginations can run wild with ideas, there are certain factors that must exist in order for them to be economically viable.

One of the factors that must exist for an industry to survive is a demand for the product. That seems simple enough, but without demand there is no reason to produce the product. An idea that seems great and useful for a small segment of the population (market) may not seem that way to rest, and therefore the necessary demand to make it economically viable in the market may not exist. Without sufficient demand, there is no reason to produce the product.

The ability to deliver the product to consumers at a price that will cause consumers to buy it is also of primary importance. This, of course is the supply side of the equation. The manufacturer must be able to produce a product at an expense that is less than the price that they can charge consumers to buy it. This is very easy to understand, right? The amount a manufacturer obtains by selling the product must be more than what the consumer pays for the product, so the result is a profit. Without profit, the product is not viable in the market and the business cannot continue to produce and sell the product.

Another factor in the survival of the new product is competition, which is closely related to supply because competition is a product of having many suppliers. While competition is a benefit to the consumer, it may present itself as a detriment to producers because if there is a cheaper alternative to their product, it may affect its survival.

There are and have been many products in the market that cannot, without government intervention (in the form of subsidies) make it in the market because it is just too expensive to produce. Either the product requires raw materials that are expensive or the process itself is long and labor intensive, causing the price that is necessary to offset the expenses to be higher than what a consumer is willing to pay to obtain the product.

Solar panels are an example of a product/ invention that is not quite economically viable. The idea of capturing solar energy for consumer use instead of paying for electricity from an electric company is very attractive. However, it is just not economically viable because the production expenses required to produce them require an offsetting price that most consumers are not willing to pay. Additionally, the price to buy electricity from an electric company is a lot more economically reasonable (cheaper) for consumers, than to pay thousands of dollars up front to buy solar panels and have them installed, only to have to wait several years to see a return on the investment. Obviously, there are some people that can and will be able to pay, but many more cannot and will not. But, it won’t be until solar panels can be produced a lot more cheaply, that they will become economically viable in the market.

An example of an invention that was very desirous but too expensive for most consumers to purchase was the automobile, in the initial stages of its existence. Upon the invention of the automobile and subsequent manufacturing effort, it was very expensive to produce. The process took a lot of time and was very complicated, causing the offsetting price to be high. That was until the invention of the assembly line (in which Henry Ford is accredited with applying it to automobile manufacturing). Once the assembly line was applied to the process of manufacturing automobiles, it vastly reduced the labor effort, time and cost to produce automobiles. This new manufacturing process allowed manufactures to charge a price that was more attractive to consumers, allowing more consumers to afford to buy them. And the rest is history. The automobile industry has survived because it became economically viable in the market.

Economics if life.

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