Input Substitution: The Case of ATMs

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Input Substitution: The Case of ATMs

The assumptions present in resource allocation include the need for optimal reduction of costs. It is important to note that between the year 1990 and 2000s an estimated 80,000 bank tellers lost their positions because of adoption of automated teller machines in the banking industry. Theoretically, modern entities usually move to achieve what can be termed as the least cost combination of their respective inputs with the last dollar being integral in making identical contributions to the total outputs. Based on this rule, assumptions held note that entities shift the inputs as part of a response to changes in technology and more so in the prices of inputs. Entities adjust to the needs of clients, with respect to the baking industry, with an inclination to reducing their costs of operation and optimizing efficiencies in delivering services to the clients.

The demand for bank tellers and other employees was influenced by the demand of various banking services. The emergence of new technology such as internet banking models, mobile banking, and the growth of functions serviced by automated teller machines, will cause a high number of banking employees to lose their employment due to such changes in the market. The integration of ATMs in the banking industry adheres to the assumption of combination of least-cost inputs. ATMs have evolved into efficient, highly productive single machines that can provide multiple services and numerous client transactions.

Money-income determination is an important assumption that guides the adoption of ATMs by the banking industry as opposed to employment of additional employees or tellers to provide services. The prices of resources, as in this case ATMs as opposed to employing tellers, is an important consideration and factor influencing this trend around the world. Money-income determination is important in that is can be understood as a cost-benefit perspective of understanding the adoption of automated teller machines in the banking industry. In addition, the prices of resources are a determinant in the allocation of the same. In this assumption, it is evident that the associated price of employing tellers as compared to adoption of automated teller machines illustrates the basis of selection of ATMs by the banking industry. It is relatively inexpensive to maintain ATMs as opposed to maintaining human tellers.

The varied levels of efficiency between the two are highly contrasted in the sense that they provide two diverse levels of benefits versus costs. The demand of a resource, in this case either the ATMs or human tellers, is entirely dependent on two primary factors namely, the productivity of such resources and the market prices associated with the service or product being delivered. In essence, resource pricing is relative to profit maximization for the banking institutions. This is because in both the product and service markets, the quantity of output and marginal revenue should be relatively equal for profit maximization and optimization. Furthermore, the analogous rule applies to resource market such as the demand for ATMs in the banking industry. The marginal resource cost of providing services to customers is equal to the marginal revenue product that is accruable to the marginal revenue product attributable to the adoption of ATMs in the banking industry.

Entities in the banking industry adhere to the assumptions that acquisition of additional resources, in this case ATMs, should be done if each unit is able to increase the revenue than it would for costs. Hence, if entities were confined to using human tellers in banks, supplementary number of tellers in banks would result in increased costs associated with hiring an additional employee. Costs such as wages and salaries both direct and indirect labor, would result in higher operational costs than it would in the event that it increased the number of ATMs.

The marginal revenue product (MRP) is achieved by the entity’s resource (ATM) demand schedule prevalent in the competitive resource market given that the firm will acquire additional ATMs with consideration that its marginal resource cost (MRC) is equivalent to its MRP. The demand for resources is determined by a variety of factors. Such factors include shifts in the demand for product or service, in this case banking facilities and their respective services. Additionally, the shifts in terms of demand for services associated with the resources and the demand for the resource (ATMs) are correlated given that they change in similar directions.

On the other hand, it is important to note that ATMs could also be threatened by changes brought about by new technology such as internet banking. Internet banking has revolutionized access to banking services and more so consumer activity. This adheres to the same analogous assumption of changes in resource demand. Demand for this resource (ATMs) would be altered by introduction of new resources and availability of such resources as compared to ATMs.

The presence of new technology could also alter the demand for automated teller machines given the decline in demand for cash in transactions. Paperless transactions using cards and mobile phones could also replace the demand for automated teller machines, in a similar manner that the ATMs reduced the demand for human teller oriented services in the banking industry. As a result, the demand for ATMs will only be present if no substitution resources emerge in the future, to pose a threat to the efficiency of ATMs in the banking industry. In addition, efficiency levels of new technology will all adhere to the analogous assumption towards marginal revenue and costs of resources. In addition, profit maximization will also be a significant consideration in the use of such resources in the near future when compared with the use of ATMs.