Question

Give an example of a network economy and explain why it can lead to benefits as well as problems in an economy.

19. Give an example of a network economy and explain why it can lead to benefits as well as problems in an economy.

Answer 1

Network economy is defined as economic order dominated by connectivity,internet and human knowledge

Airbnb is an example of network economy.Airbnb thrives on connectivity between its users to spread it's services and provide a feedback on the same.

Benefits of network economy include:

In a network economy all elements of a business are strongly interconnected by technology.This helps in production of more value based products as feedback and data's can be quickly obtained.

Product can reach more no of consumer pool due to connectivity.

Labour pool is also increased due to increased connectivity.

Consumers can look to various data's present in the market to decide on a product.

Companies can quickly evolve to varying consumer habits and demographics.

Optimization of.resources are more effectively done in network economy

Innovations are more encouraged by network economy and connectivity provides him easy access to resources to practicalise ideas.

Problems include:

Data collected for network economy has been in the spotlight many times for failure to honor privacy.Security of these data's has been the target for many breachs which compromises the privacy of individuals.

It is changing the required skill sets needed for people to get a job.Many people are getiing pushed out of the labour market forcefully.

Copyright protection is another challenge network economy needs to overcome.

Information cheating and hacking can be done to manipulate the data's which drives the network economy.

Thanks for the question.