New Car Factory in India
In an attempt to produce small cars, Toyota is building a new plant in India. Their goal is to get a jump on the growing automobile industry of newly developing countries. With new and improved technology and low production costs, the plant will be able to produce these small cars for relatively low, reasonable prices. Toyota will be in stiff competition with Suzuki, which now owns roughly 50% of the automobile industry in India. In turn this competition should even further lower the retail price of the small family sedans.
The marginal benefits of production should outweigh the marignal costs considerably because they are entering a market which is in high demand for cars. The invisible hand is evident in this scenario because the people are who will ultimatley control if the business will succeed or fail in this developing country. The country should experience slight economic growth because of the new products and high demand.
In conclusion, the country will ultimatley benefit economically from the production of these cars, and would cause a PPF to shift outward because of the new technology and resources that will be available.
2 comments:
The reason of Toyota is building a new plant in India is the marginal cost would be lower in India. India is a developing country, so the payment of employees, rents would be cheaper than developed countries. The cars produced by Toyota are popular by middle-income people; and the price should not exceed the middle-income people’s affordability. Therefore, Toyota would have a high marginal benefit while Toyota produces cars in India in the future.
Arguably, another reason why Toyota has decided to expand it's production into India is because of the lack of harsh environmental policies or laws in the country. Of course it will be cheaper to produce in a country like India when a company doesn't have to go through proper waste clean-up procedures.
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