Problem 1:


1. Question: What variables determine the amount of commodities provided to the market according to the theory of supply?


2. Question: How did the availability of resources decrease as a result of the earthquake and tsunami in Japan in 2011? 


3. Question: What does the supply curve show and how does it demonstrate the relationship between price and quantity?


4. Question: How is the decrease in the quantity of goods supplied to the market illustrated using a diagram?


5. Question: What happened to the supply and price of Toyota cars as a result of the earthquake and tsunami according to the diagram?


6. Question: What caused the new market equilibrium with a higher price and lower quantity compared to the initial equilibrium? 


7. Question: How did the supply of Toyota cars recover by 2012 as mentioned in the requirements?


8. Question: What happened to the price and quantity traded as supply increased again according to the figure?


9. Question: What does the overall supply theory explain regarding the output of manufactured goods like Toyota cars due to natural disasters?

Answer:

According to the theory of supply, a number of variables, including the cost of production, the price of the good, and the availability of resources, interact to determine the amount of commodities that are provided to the market. When the earthquake and tsunami struck Japan in 2011, supply chains and production facilities were destroyed, which delayed the flow of manufactured goods like Toyota vehicles.

The availability of resources including personnel and machinery decreased as a result of the destruction of manufacturing facilities. Due to a lack of resources, manufacturing facilities' capacity to produce less product, which in turn reduced the amount of items available for sale. The number of commodities provided to the market fell or led to shortage as a result of supply chain disruptions. The supply needs the infrastructure to transport (roads and ports) goods from one place to another, is destroyed, the movement of goods and services is disrupted.

The supply curve shows how the earthquake and tsunami affected the availability of Toyota vehicles. The supply curve demonstrates the relationship between a product's pricing and the quantity of that product that producers are prepared and able to sell to the market. As a product's price rises, manufacturers are more likely to supply the market with more of that product which is represented by upward-sloping supply curve. Likewise, producers are willing to release fewer units of a good onto the market when its price drops.

The decrease in the quantity of goods supplied to the market illustrated using a diagram of the supply curve. In the case of the Japanese earthquake and tsunami, the supply curve shifted to the left, indicating a decrease in the quantity of Toyota cars supplied to the market at any given price. This is shown in the diagram below: 




The diagram shows the equilibrium of the market before and after the earthquake and tsunami 2011, the initial supply curve QSo and initial demand curve QDo represent the market equilibrium. At initial market equilibrium Eo the price is Po while demand is Qo. Due to the earthquake and tsunami 2011 the disequilibrium occur in the market which resulted in reduction in supply due to shortage of availability of resources. As a result of the decrease in the quantity of goods supplied to the market and the price of Toyota cars increased. This increase in price illustrated in above diagram of the market equilibrium. The new market equilibrium prevail which is the intersection of the new supply curve and the demand curve, which determines the price and quantity of goods traded in the market. The Japanese earthquake and tsunami cause to reduction in the quantity of Toyota cars supplied to the market led to an increase in the price of Toyota cars. 

As mentioned in the requirements, the reduction in the supply due to earthquake and tsunami 2011 recovered by the Toyota in 2012. Due to rise in demand the regain supply track to back on its original position and rise the supply meet market demand. 



The figure shows that rise in supply again increase the demand and reduce the price which cause to regain market equilibrium. New quantity demanded and supplied is Q1 while price is P1. Overall supply theory explain the way natural disasters such as the tsunami in Japan affect the output of manufactured goods such as Toyota cars. The destruction of manufacturing plants and the disruption of supply chains led to a decrease in the quantity of goods supplied to the market, which in turn led to an increase in the price of Toyota cars.