Econometric Model for Toyota and GM

Paper Summary:

This paper discusses the speculation surrounding the business model of Toyota and the likelihood of Toyota surpassing General Motors (GM) in the near future. It identifies the necessary economic model that will explain this phenomenon. The paper then gives accurate predictions surrounding the future trends of sales and profits for both companies. It provides graphs to illustrate its points.

Table of Contents:
The Competitiveness of Toyota and GM: Implications From the Model
Toyota's Price Elasticity: How Can Toyota Sell More than GM at a Higher Price?

From the Paper:

"Toyota's fleet of hybrid cars is so expansive and popular, that the consumer preference factor favors them. Since the society is generally becoming more 'green'; Toyota has seen substantial increases in the quantity demanded of these cars. Also, consumers who don't necessarily buy Hybrid cars may affiliate some philanthropic notion in regards to Toyota's current strategy and still prefer to buy automobiles from the company.
"The price of gas is a major determinant within this model, as the price of gasoline continues to increase, there is the expectation that the quantity demanded of automobiles in general will fall, however companies like Toyota that market cars with higher miles per gallon, may not face the most significant decrease in the quantity demanded as GM."

Sample of Sources Used:

• McConnell, C. and B., Stanley. Macroeconomics 16th Edition. New York: McGraw-Hill, 2005.

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