Quake-hit+Toyota+slows+production+-+Kevin+Miao

= Title of Article: Quake-hit Toyota slows production  = = Source: http://www.thestar.com/business/article/977271--quake-hit-toyota-slows-production  = = Date: April 19, 2011  = =  = =  Explanation: In this article, the car company, Toyota, will be slowing down production by 70%. This means that there will be a very drastic drop in supply of Toyota cars until early July. The main determinant of supply is the cost of factors of production. Toyota is a company made in Japan, and just recently a large earthquake has hit Japan. The earthquake largely affected Toyota and has created scarcity in the goods that produce the Toyota cars. Therefore, Toyota most likely could have an immobility of its factors of production. Because of the lack of its factors of production, Toyota will have to lower its supply. Here, the opportunity cost for Toyota is to not cut production. Toyota can either cut production, which leads to a loss in supply and probably a drop in sales, or to not cut production, which can lead to losses in the long run. Therefore, to not risk being shut down, Toyota will have to reduce production drastically. = =  = =  Vocabulary:  = = · Factors of production – resources that allow an economy to produce its output  = = · Supply – willingness and ability of producers to produce a quantity of a good or service at a given price in a given time period  = = · Determinants of supply – factors that determine supply  = = · Opportunity cost – second best choice  = = · Production possibility curve – shows the maximum combinations of goods and services that can be produced by an economy in a given time period  = = · Short run – period of time in which at least one factor production is fixed  = = · Long run – period of time in which all factors of production are variable =

 =   = =  Here, you can see the production possibility curve for Toyota. On the y-axis, Toyota can cut production completely. On the x-axis, Toyota can continue production without slowing produciton at all. In this article, Toyota will be producing at around X, where they are slowing down production by 70%. = =  = =  Evaluation: I, as an economist, agree with this article. Being hit by the earthquake has proven very bad for Toyota. Therefore the only smart move they can make is to slow down production. With this idea, Toyota may have many losses, but this is only in the short run. If they do not cut production, they will have losses in the long run. It is better to have losses in the short-run for Toyota because they cannot risk being shut down. This is one of the only moves Toyota can make in this situation. Slowing down production by 70% may be a bit much, but this policy is only short term and is necessary for Toyota to do. =