As far as economics is concerned, interest rate is the cost of capital. On the other hand, it indicates the rate at which a specific borrower will pay the lender. Therefore, it should be known that interest rate is a very important economic indicator.
In this case, interest rates show the prevailing economic conditions of a given economy at a particular period of time (Gartner, 2006, p. 23). This means that interest rates have diverse impacts on specific industries. In this case, they can be evaluated by looking at product sales and operating costs.
The healthcare industry can be greatly affected by the prevailing interest rates. They might take loans to finance their operations and this means that they have to repay. Whenever interest rates are high, the industry will always pass these costs to consumers and this can be reflected in high prices.
In this case, high prices will lead to low product sales (Mishkin, 2004, p. 13). On the other hand, high interest rates can also increase operating costs. This is because they have to finance their loans from the company’s revenues. An industry can have low operational costs if it can acquire loans at low interest rates.
Wholesomely, interest rates will dictate the level of investments that can be witnessed in an industry. Interest rates affect the automobile industry in a broad way. Most people and consumers depend on loans to buy automobiles.
This means that when interest rates are low, many consumers will buy automobiles and this will translate to more product sales (Gartner, 2006, p. 28). The industries operating costs depend on interest rates that are charged on loans. Low interest rate on loans means that the industry will not spend a lot of money on financing loans and this will reduce operating costs.
Income
Income levels show the prevailing economic conditions of a given economy. High income levels show that the economy is performing well. Low income levels show that the economy is performing poorly. This is as far as personal incomes and the economy’s income are concerned.
The healthcare and automobiles industry affect peoples lifestyle and any income changes are likely to be reflected either positively or negatively. High income means that the healthcare industry will have high product sales based on personal income (Mishkin, 2004, p. 32).
This is because people will want to invest in their health. Operating costs can also be reduced by high incomes in a broad way. This is as far as the healthcare industry is concerned.
When the industry registers high sales, companies will not spend a lot of money in trying to drive up sales and this means that they will have low operating costs (Gartner, 2006, p. 48). This will therefore make them profitable and sustainable (both in the short term and long term). It should be known that any increase in income will ultimately be reflected in people’s lifestyle.
Therefore, the automobiles industry will have high product sales when there is an increase in income (Gartner, 2006, p. 37). The opposite will happen when income reduces.
High product sales that are demand driven will reduce the industries operating costs. Low income levels means that the industry will spend a lot in an effort to increase sales and this will be reflected in high operating costs (Mishkin, 2004, p. 52).
Consumer confidence
Consumer confidence is a very important economic indicator that shows the degree of optimism. This is as far as the general state of the economy and their financial position is concerned. In this case, consumer confidence dictates peoples spending habits and trends (Gartner, 2006, p. 41).
It should be known that when the economy expands, consumers will have more confidence and this means that they will make purchases.
Therefore, both the healthcare and the automobile industries will register high and increased product sales. This is because consumers will not fear to spend since they will be more positive about their personal finance and the general state of the economy.
Wholesomely, consumer confidence can affect the healthcare and the automobile industries operating costs from different perspectives. Because consumer confidence is related with the state of the economy, a high consumer confidence means that there are fewer reservations about various aspects of the economy.
This therefore means that the economy is doing well and there are fewer risks as far as doing business is concerned (Mishkin, 2004, p. 48). In the process, both industries will have low operating costs and this is good for profitability.
Wage rates
An economy’s wage rates show if it is performing well or not. This means that if an economy is creating and generating wealth, it will always reward workers with good wage rates. Therefore, high wage rates will leave people with a good disposable income that they will end up spending on various products and services (Gartner, 2006, p. 62).
In this case, as far as the healthcare and automobile industry are concerned, product sales will go up as time goes by. This is because consumers are not worried about tomorrow based on good wages.
The opposite happens when consumers are paid low wages because they will only spend their money on urgent needs. Wage is a factor of production and it therefore has an impact on operation costs.
When the cost of living goes up, workers will demand high wages and this will increase the industry’s operating costs (Mishkin, 2004, p. 34). Therefore, the healthcare and the automobiles industries will have low and high operation costs depending on the prevailing wage rates in the market.
Reference list
Gartner, M. (2006), Macroeconomics. New York: Pearson Education Limited.
Mishkin, F, S. (2004). The Economics of Money, Banking, and Financial Markets. Boston: Addison-Wesley.