Market Equilibration Process - Sony in Tokyo Economic Changing Event, March 11, 2011

Week 2 Market Equilibration Process

name

ECO/561

PA15MBA01

September 2, 2015

Prof.

Market Equilibration Process

Sony in Tokyo Economic Changing Event, March 11, 2011

Movie production is a worldwide industry. This industry has many complementary aspects including component parts and equipment manufactured from all areas of the world, predominantly Japan. Sony, a name brand in the movie industry, supplies parts to the cinematographic industry, their manufacturing based in various cities in Japan. This paper will depict the economic affect a natural disaster causes an industries even across the world, in California. The paper will briefly touch on the laws of demand and supply and determinants of those aspects as well as describe the efficient market theory. Furthermore, an explanation of surplus and shortage is in relation to supply and demand.

March 11, 2011 an earthquake hit the Pacific Coast of Tohoku. A tsunami then followed which caused the final devastating effects on Japan with a greater danger compounding the crisis at the Fukushima nuclear reactors becoming radioactive. There was destruction of many cities and power-outages and shortages of basic necessities. This natural disaster caused many problems worldwide. Sony Japan was also severely impacted with many of the manufacturing facilities stopped by either destruction or power-outages. Sony is the leading manufacturer for complementary parts for the movie industry. The disaster halted production of all its products. Suddenly there is a shortage for important components needed for this industry.

The Law of demand indicates that if an item is desired, it sets the price. If the product is highly sought after, for example a heart medication, it will demand a higher rate than a product that is common and readily available (McConnell, et al. 2009). The law of supply is similar but reversed the surplus of products, the less its value.

The efficient market theory focuses on the value of a stock related to all relevant value indicators, as explained in The Concise Encyclopedia Of Economics web site written by Stevens Jones and Jeffrey Netter they state that “price of an asset reflects all relevant information that is available about the intrinsic value of the asset” (2008). This means that the relevant market value of today’s stock cannot predict the value for a stock in the future. However, if strong organizations like Sony takes a hit due to an event like the one that occurred in Japan, the stock will probably fall and not increase in value for a time after. According to Finance Yahoo, data