Assignment 4: Automotive Production Levels General Motors

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Assignment 4: Automotive Production Levels
General Motors

Shelia Lott

Eco 550 - Managerial Economics and Globalization
Dr. John Ilokwu Ph.D.
September 5, 2012

General Motors Company
General Motors Corporation (GM) is the largest company in an industry that has a major impact on the American economy and in the world. GM has led the auto industry in innovation and for most of the 20th century. From 1931 to 2008 GM led in the industry only to be surpassed by Toyota in 2008.
After major cutbacks for over two years, GM found itself at the brink of bankruptcy and accepted government financial assistance and plan for debt reconstruction and recovery. Under this plan, brands Chevrolet, Cadillac, and GMC became the base brands for General Motors Company. General Motors sales cars in 31 countries, these brands also include Opel, Holden, and Vauxhall.
The law of demand states that the higher the price of a good or service, the less likely will people have a demand for that good or service with all other factors being constant. As a result the higher priced a GM product the less quantity demand by the consumer. A picture of this would indicate a downward slope in the demand curve.
The law of supply states that quantities sold at a higher price will cause an upward slope in the curve and unlike the demand curve the price will remain high because this will increase revenue. In the example to the Chevrolet Camaro a slack in production may increase the price even more because of scarcity. The effect can even be sought for a specific color or equipment. According to USA Today, Chevrolet struggled in 2010 to meet the demand of the Chevrolet Camaro and buyers paid $500 to $2500 more than the suggested retail to have an opportunity to make their purchase. The Chevy Camaro has outsold Ford Mustang for the first time since 1985. In 2011 for the…...

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