PLEASE DRAW THE DEMAND & SUPPLY CURVE AS PER THE ANSWER BELOW:

How may ChatGPT technology affect market competition? To answer this question let assume that market is competitive, hence, provide demand and supply curves to support your argument.

(Marks: 3)

Answer: According to Des et al. (2023) and Nabin et al. (2019, pp. 261-278), as an AI language model, ChatGPT technology can potentially affect market competition by reducing the barriers to entry for new firms and increasing the efficiency of existing firms. This can lead to a shift in the supply curve to the right, resulting in lower prices and increased output in the market.

To illustrate this, let's consider a competitive market for a generic product, such as smartphones. The demand curve for smartphones is downward sloping, indicating that consumers will demand more smartphones at lower prices. The supply curve for smartphones is upward sloping, indicating that firms will supply more smartphones at higher prices.

For above example, initially, the market is in equilibrium at point A, where the supply and demand curves intersect. At this point, the price of smartphones is P1 and the quantity sold is Q1.

If ChatGPT technology were to enter the market and reduce the barriers to entry for new firms, this could shift the supply curve to the right, as more firms enter the market to take advantage of the increased efficiency. The new supply curve is represented by S2.

As a result of the increased supply, the market price would fall to P2 and the quantity sold would increase to Q2, as shown in the diagram. This represents a new equilibrium point B in the market.

The decrease in price and increase in quantity sold would benefit consumers, as they would be able to purchase smartphones at a lower price, and firms would benefit from increased sales volume.

However, this increased competition could also reduce the profits of existing firms, including those that produce smartphones. As a result, some firms may be forced to exit the market, leading to a decrease in supply and potentially higher prices.

Overall, the impact of ChatGPT technology on market competition would depend on a variety of factors, including the specific market structure and the degree of technological innovation. In a competitive market, however, the introduction of new technology could increase efficiency, reduce prices, and increase output.