China+factories+face+shortages+due+to+Japan+quake

http://www.google.com/hostednews/afp/article/ALeqM5jRU2ZTDKhRx0an4vSDXsNNUclFWw?docId=CNG.ae0f03102b5acab0007958759821e147.471 April 10th, 2011
 * China factories face shortages due to Japan quake**

In this article, it can be analyzed in both micro and macro aspects. First in a micro view, because the tsunami has destroyed many infrastructures and resources, the country’s actual growth has decreased, as shown in a PPC diagram, figure 1. This shows that before the earthquake, the country’s production on goods such as food is along the curve A, but after the earthquake, the curves shifts left into curve B, the actual growth is along curve B now. Electronic companies will also have to face shortages on supply, thus the prices for electronics will rise, as illustrated in figure 2. The supply of electronics decrease, and assuming the population stays the same, there will be consumers demand limited goods, therefore the prices rise. In economic development, it has definitely gone down due to the disaster; it will perhaps take years for the people to rebuild their environments.

Fig 1. Fig 2. In a macro view, according to the article, “Japan is a key supplier of components and equipment used in the assembly of cars, laptops, iPods, refrigerators and flat-screen televisions, and the country accounts for about 14 percent of China's imports, according to UBS.” This means Japan has lost 14% of export, which is bad for the economy. According to the formula GDP=C+G+I+(X-M), and if x decreases, C will decrease too, which means the GDP will go down. However, because the countries don’t want to import products to Japan, the imports will decrease. Based on the formula above, X-M, if the loss of exports is less than imports, it can be beneficial in economic growth. Also, since repairing is required, the government spending is added to the GDP and it is good in an ironic way. Furthermore, because resources are destroyed, the country’s aggregate supply will decrease. Not only does the disaster hurt Japan’s economy, it will also hurt China’s economy, even though its limited since it “only accounts for 2% of China’s economy”.

Overall, I believe the earthquake is going to hit Japan’s economy hard, while influencing other countries’ economies as well. Many countries now stop accepting fish products from Japan because they may be radiated. I think the government should spend money on increasing economic development instead of economic growth because people are more important than money. In the long run, Japan’s economy will recover but it may take years for it to achieve that. China will need to find new electronic components suppliers or else the shortages will continue. It will be interesting to see what policies China will make to help repair its economic growth.

Definition: Supply and Demand: A graph showing at different prices, how many goods consumer are willing and able to pay and producers willing and able to supply Aggregate Supply: total amount of goods and services that all industries in the economy will produce at every given price level Economic Growth: A measure of national income GDP(Gross Domestic Product):Total value of all spending in the economy.GDP=C+I+G+(X-M) Economic Development: A measure of welfare, using indicators such as education, health, and social indicators