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That doesn't really make a lot of sense. Demand is pretty predictable for stuff like that, and the producers have no reason to waste resources producing more th

That doesn't really make a lot of sense. Demand is pretty predictable for stuff like that, and the producers have no reason to waste resources producing more than is necessary. And even when they do overestimate demand, like you said, it gets marked down. So it all gets consumed in the end, and the producers might not even take that big of a loss depending on how much it was marked down. And the poor people benefit from that too of course. Unless people start throwing away new cars then they aren't over producing.

TeMPOraL 11y ago
Except there isn't one producer, there's many competing ones, so you have overproduction because everyone hopes to get more market share than they actually have. Over that, there's overproduction in many areas (especially food) for a very silly reason - that people will buy more when there's more stuff around it (aka. no one wants to buy the last few carrots). It doesn't get consumed, and poor people don't benefit from it. It gets thrown away. About throwing away new things - heard of planned obsolescence? That's what companies now do to cope with falling demand. Yes, your car maker does it too.
- Houshalter 11y ago
  Large corporations are not stupid. They have decades of sales data. They can definitely predict demand a year in advance, and they do. I don't actually think they are overproducing. They make a huge markup on new cars, so having to discount a few that don't sell isn't a loss. Also factories are pretty much large fixed costs. Overproducing actually doesn't cost that much. The car might only cost $500 worth of raw materials, but the cost of the factories and infrastructure necessary to turn that into a car is massive. >(aka. no one wants to buy the last few carrots) Which is literally only true for vegetables, not the economy in general. And you only need to sacrifice a handful of vegetables to for it, so it's a fixed cost.
  - freehunter 11y ago
    Look at the Cash for Clunkers program a few years back. People were paid to bring in their old, but still functioning cars, and buy new ones. Many of those old cars were still fully functioning, and not that old. We have the production capacity for so much more than we actually make. You're right, they can predict sales so they're not making 1,000,000 units more than they can sell, but they CAN make that many. The thing about overproduction is, like you mentioned, it doesn't last for long. Demand drops, they shut down plants, they close shifts, they fire workers. Believe me, I live in Michigan and have many friends and family workers who work (or worked) in the auto industry. We have the ability to churn out hundreds of millions of more cars every year than we actually do. Like you said, we don't do that because it doesn't make financial sense. But just because we don't overproduce right now doesn't mean we couldn't if we wanted to. I'm still not seeing where production is the problem. If production was the limiting factor, they would be running the factories 24/7 instead of shutting them down. The only reason to underproduce is to increase demand. But if you lower supply and demand doesn't increase, you've already been overproducing. So if they're closing factories, it means they've been overproducing.
    - Houshalter 11y ago
      >Look at the Cash for Clunkers program a few years back. Which was done just after a recession. That's not evidence of overproduction in general, just one year when demand unexpectedly went down. >But just because we don't overproduce right now doesn't mean we couldn't if we wanted to. I'm still not seeing where production is the problem. If production was the limiting factor, they would be running the factories 24/7 instead of shutting them down. But if we can produce so many cars, why are cars still expensive? Shouldn't the ability to create massive supply drive the price down a lot? There are plenty of people that want new cars. And are willing to pay for them. It's not like we have more cars than people actually want. It just costs a lot to make a car. And that cost includes fixed costs like the factory itself. But factories wouldn't be closing down if other costs weren't also very large. Yes in theory we could make millions more cars than we do. But not for free. It would require buying more materials, hiring more workers, building new production lines, etc. Those costs must be greater than the expected return for selling another car. Otherwise they would already be doing it.

TeMPOraL 11y ago

Except there isn't one producer, there's many competing ones, so you have overproduction because everyone hopes to get more market share than they actually have. Over that, there's overproduction in many areas (especially food) for a very silly reason - that people will buy more when there's more stuff around it (aka. no one wants to buy the last few carrots). It doesn't get consumed, and poor people don't benefit from it. It gets thrown away. About throwing away new things - heard of planned obsolescence? That's what companies now do to cope with falling demand. Yes, your car maker does it too.

Houshalter 11y ago
Large corporations are not stupid. They have decades of sales data. They can definitely predict demand a year in advance, and they do. I don't actually think they are overproducing. They make a huge markup on new cars, so having to discount a few that don't sell isn't a loss. Also factories are pretty much large fixed costs. Overproducing actually doesn't cost that much. The car might only cost $500 worth of raw materials, but the cost of the factories and infrastructure necessary to turn that into a car is massive. >(aka. no one wants to buy the last few carrots) Which is literally only true for vegetables, not the economy in general. And you only need to sacrifice a handful of vegetables to for it, so it's a fixed cost.
- freehunter 11y ago
  Look at the Cash for Clunkers program a few years back. People were paid to bring in their old, but still functioning cars, and buy new ones. Many of those old cars were still fully functioning, and not that old. We have the production capacity for so much more than we actually make. You're right, they can predict sales so they're not making 1,000,000 units more than they can sell, but they CAN make that many. The thing about overproduction is, like you mentioned, it doesn't last for long. Demand drops, they shut down plants, they close shifts, they fire workers. Believe me, I live in Michigan and have many friends and family workers who work (or worked) in the auto industry. We have the ability to churn out hundreds of millions of more cars every year than we actually do. Like you said, we don't do that because it doesn't make financial sense. But just because we don't overproduce right now doesn't mean we couldn't if we wanted to. I'm still not seeing where production is the problem. If production was the limiting factor, they would be running the factories 24/7 instead of shutting them down. The only reason to underproduce is to increase demand. But if you lower supply and demand doesn't increase, you've already been overproducing. So if they're closing factories, it means they've been overproducing.
  - Houshalter 11y ago
    >Look at the Cash for Clunkers program a few years back. Which was done just after a recession. That's not evidence of overproduction in general, just one year when demand unexpectedly went down. >But just because we don't overproduce right now doesn't mean we couldn't if we wanted to. I'm still not seeing where production is the problem. If production was the limiting factor, they would be running the factories 24/7 instead of shutting them down. But if we can produce so many cars, why are cars still expensive? Shouldn't the ability to create massive supply drive the price down a lot? There are plenty of people that want new cars. And are willing to pay for them. It's not like we have more cars than people actually want. It just costs a lot to make a car. And that cost includes fixed costs like the factory itself. But factories wouldn't be closing down if other costs weren't also very large. Yes in theory we could make millions more cars than we do. But not for free. It would require buying more materials, hiring more workers, building new production lines, etc. Those costs must be greater than the expected return for selling another car. Otherwise they would already be doing it.