U.S. Low Fuel Prices Drive Consumers Away From Smaller Cars
by: Mike Colias
Jan 03, 2017
Click here to view the full article on WSJ.com
by: Mike Colias
Jan 03, 2017
Click here to view the full article on WSJ.com
TOPICS: Supply and Demand
SUMMARY: While sales of pricey light trucks amid a sustained run of cheap fuel may be good for Detroit's bottom line, the collapse in demand for smaller vehicles has led to job cuts elsewhere.
CLASSROOM APPLICATION: Instructors can put an auto manufacturer's decision about the number of autos to produce for each product in its line in terms of decision making under uncertainty.
QUESTIONS:
1. (Advanced) What variables do auto manufacturers include in their determining their forecasts of automobile demand?
2. (Advanced) How does the length of time and the cost of adjusting manufacturing to changes in actual demand for different types of automobiles affect the degree to which manufacturers are willing to use forecasts in making production decisions?
3. (Introductory) What is the effect of an auto manufacturer producing too many smaller cars and too few crossovers and trucks on the firm's profits?
1. (Advanced) What variables do auto manufacturers include in their determining their forecasts of automobile demand?
2. (Advanced) How does the length of time and the cost of adjusting manufacturing to changes in actual demand for different types of automobiles affect the degree to which manufacturers are willing to use forecasts in making production decisions?
3. (Introductory) What is the effect of an auto manufacturer producing too many smaller cars and too few crossovers and trucks on the firm's profits?
Reviewed By: James Dearden, Lehigh University
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