Looking at the current demand and supply curves for GM, what do you think GM must do to become economically sound again? Explain whether the supply curve needs to shift upwards to the left or downwards to the right and why. Also, explain what would happen to the quantity demanded for GM cars once GM accomplishes the necessary steps on the supply side. Think of how consumers and suppliers behave in terms of quantity at any given price, and what variables can shift the supply curve to meet or increase the quantity demanded by consumers at a given price level.
Tags: GM's Bankruptcy
GM needs to lower prices in order for people to be able to afford cars more easily in the current state of the economy. The supply curve would need to move to the right in order to lower prices. The demand for GM products would increase because they would be more affordable.
Suppliers produce less at a lower price and more at a higher price because they gain more profit. Consumers however will buy more at a lower place and less at a higher price so there will be less demanded. In order for consumers and producers to meet at equilibrium they need to be able to “agree” on the price they are willing to buy/sell the product for. In order to meet/increase the quantity demanded by consumers at a given price level, the producers need to either change the price, or offer something that competitors don’t.
GM did the right thing by filling for bankruptcy. People are not buying GM cars due too their high prices. If GM wants people to buy there cars they must lower their prices. For this situation the supply curve must move to the right in order to lower prices.
Once GM has accomplished the necessary steps the supplier should produce more at a lower price compared to a high price because consumers will buy more. Even though they will make be making as much money if the cars were set at a high price but at least people are buying them. Lets face it people are not going to spend all this money on cars that doesnt offer much! The only way to match suppliers and consumers is if they reach a compatitable price that works for both. Consumers want a lower price while the suppliers want to make the most money possible, they need to come to an agrement!
GM is doing its best to survive in this downturn economy. However, the company loses consumers’ loyalty. GM filed for bankruptcy. They have a surplus inventory because people don’t want to buy GM’s products at a high price. In order to sell the products, GM has to offer a lower price. The supply curve will shift downward to the right. The quantity demanded will increase since it is affordable. Looking at the situation as a consumer’s perspective, now is the time to take advantage of the prices. We will buy more products at a lower price with a good quality. In contrast, suppliers are not happy about that because they want to make lots of money. They want to sell their product at a high possible price. On the other hand, taste can shift the supply curve upward to the left or downward to the right. If GM’s production is unique, then suppliers can supply less but at a high price. Some people are willing to buy it. In this case, the supply curve will shift upward to the left. I don’t think that is gonna happen.
Personally, I believe GM should have been allowed to be subject to receivership through the federal bankruptcy laws. However, seeing this isn’t the case and we must assume that success is the answer for GM, especially because we the taxpayers are the primary investors in it. GM needs to simultaneously create a quality product that offers itself at a cost that is affordable meaning lowering its current prices. This will create a move along the demand line and a shift downward or to the right along the supply curve. However to create a more cost effective vehicle at higher quality and lower price, GM needs to reduce it’s current overpaid workforce and bring in a younger and less expense workforce. The new structuring plan that is a stipulation of hiring at a new cap could solve many problems. I am one however, that believes there is little hope, even with government intervention. I believe that GM will still fall into bankruptcy…
If these bozos really want to show any glimmer of hope they should fire-sale their current inventory (taking into consideration an obvious current surplus) and engineer a decent product that someone actually wants to drive. Then and only then should they introduce new vehicles into the market in slightly limited supply which would create a mild “shortage” and bring
prices back up. The supply curve would shift up and left. At which point they will be able to manufacture more cars and stabilize the pricing. (shift the supply curve back to the right) Ta-dah!!!
GM needs to liquify assets selling all cars for lower prices. This move would be down and to the left on a supply curve. It seems clear their current inventory has a huge lack of demand, so after they get rid of all of it they can start to transform the company. honestly, I believe they should have sold to another company, because they have such a negative public image its going to be hard to recover from. They still need to bring in new people and ideas so the company can finally produce a product that people want to buy.
For GM to really come out of this hole they’re in, they would need to make serious changes in my opinion. I think they would need to make major changes in the way their cars are built so they could compete with Japanese models. This would be a lot of work and many employees would probably be structurally unemployed as they would need new training. The company would probably have to do a lot of research as well to improve the technology. Is it too late for all of that? My guess is yes, but if they did that it might shift the supply curve downward to the right. This is because the quantity demanded will increase so there will be a move on the demand curve.
The supply of GM cars is increasing as the demand is decreasing. ?
Well, it seems like they are producing more cars than demanded.
GM needs to focus on this economy. It’s an economic emergency– we are in an economic emergency. Lower the prices so people can buy. Let’s face it, everyone has a different outlook on cars. As an avid reader of Consumer Reports, General Motors’ cars are not nearly as highly rated as a Honda, or Toyota .. etc.
I know those statements seem a little off topic, but.. I feel like this is the root. Obviously.. the economy is bad, and people do not want to spend money on a gas guzzler. As I already said about my liking for Consumer Reports magazine/books, they produce many large SUVs and trucks, and not as many small sedans and crossovers. Therefore, my point it.. do not waste valuable money and time. .. or at least lower the costs.
I also cannot comprehend why they have “borrowed” as much as they have from the government. I guess this is something I will never know or understand the reasoning for that.. it’s insane.
GM, like many other companies, are stuggeling during this current economic state. GM made the best, and one of the only decisions they could by filing for bankruptcy. Because their prices were so high, consumers had no interest in purchasing these motor vehicles leaving GM with a surplus of cars. In order to fix this, GM needs to lower their prices, moving the supplu curve downward to the right.
In order to make both the suppliers and consumers happy, they need to meet at an equalibrium. This will make the consumers happy and their costs affordable, but still keep the suppliers profitable at the same time. In order to do this, GM needs to lower their prices or come up with a marketing strategy that offers their customers somethign that competating car companies dont. Maybe a deal with insurance, or a way that the customers could pay in instalments.
GM, like many other companies out there today have been struggling and filed for bankruptcy. Their high prices turned away consumers from purchasing their motor vehicles, leaving them with more cars then they were selling. If GM lowered their prices, it might help out the company alot. I agree with tullis when he/she states that in order to make both the suppliers and consumers happy, they need to meet at an equalibrium. Consumers want to purchase something they can afford, not something that will put them in debt.