Toyota+to+restart+Japanese+output+at+reduced+capacity-+Jackie+Wittich

= Title: Toyota to restart Japanese output at reduced capacity = Source of extract: http://www.bbc.co.uk/news/13009539 Date of extract: 8 April 2011

**Explanation:** In the aftermath of the earthquake disaster in Japan, Japan’s resources suffered a setback, which caused many industries to suspend production. Recently, Toyota—the largest car manufacturer in the world—has begun to restart production, however it will only do so at a reduced capacity. Other car factories are also beginning to experience similar problems. Honda, for example, is directly halving its production in the UK due to a lack of resources. What this means is that there will be a future decline in the supply of Japanese cars because of a determinant in supply, which is the decreased number of resources (car parts) that are needed to build cars. This causes the supply curve in the Japanese car industry to shift to the left, and therefore illustrates why Toyota must continue production at a reduced rate (see fig. 1). As a result, one of the factors of production that are required to allow the Japanese car industry to produce its output is being affected: capital. The lack in capital is the stock of manufacturing resources—in this case, car parts. Because this factor of production is affected, the industry’s production output decreases, explaining why Toyota and various other Japanese car companies are forced to reduce production. What this also means it that the market of car parts is facing a shortage, because the quantity available or supplied is currently unable to meet the quantity demanded by the car industries, which explains the reason for why the resources needed to produce cars are so scarce. **Vocab:** __Supply:__ Willingness and ability of producers to produce a quantity of a good or service at a given price in a given time period. __Shortage:__ a situation where the quantity available or supplied in a market falls short of the quantity demanded or required at a given time or price. __Determinants of Supply:__ Factors other than price that affect the quantities of a good or service. These include: technology changes, number of resources, tax/subsidies, prices of substitute goods. __Factors of Production:__ Factors required for the generation of goods and services, generally classified into four major groups: land, labor, capital, and management. __Resources:__ The total means available to a company for increasing production or profit, including plant, labor, and raw material; assets.

**Graph:** A change in any determinant of supply will always lead to a shift of the supply curve to either left or right. In this example, the decline in resources needed to make cars has the effect of decreasing supply of Toyota cars, and therefore shift the supply curve to the left. **Evaluation:** Currently, Toyota’s planned ‘solution’ is to start regaining supplies of most of the affected parts and using current inventories to make up for any shortfall for now. Although this solution will be able to regain losses in profit, it does not provide a way to reinstate car production for future profits. Therefore, I believe in order to fix the declined rate production there has to be government intervention. If the government were able to subsidize some of the resources needed to make cars, then the companies would not have to reduce so much of its production. Of course, this will have to be only a temporary arrangement. Once the disaster effort has been stabilized, and the resources needed to make cars will return back to its original quantity due to increased capital and labor power, car production companies will be able to regain their shortfalls on their own.