Mattell Recalls More Toys

The chosen article is entitled, Mattel recalls more toys on lead concerns, and by reading the article it just gives you an insight on what is occurring with the toy recalls. Coming about this threw a normative analysis rather a positive analysis the supply and demand curve for Mattel’s company is going to have a major shift. The supply is going to increase enormously for the simple fact that Mattel is receiving a majority of their product line back from the recall and the products are full of unhealthy lead. The demand is going to decrease because knowing the information that the company issued to the consumers, no consumer would honestly buy their child a toy knowing that it would put them in danger, therefore Mattel is going to go threw a loss and have a substitution effect. For Mattel to stay above water and not completely drown as a company, they’re going to have to lower the prices on their non-effected products to make up for the gigantic loss in profits from the recall of the toys at hand simply because the toy is no longer an asset but now it’s a liability for Mattel. With Mattel having the household name already for so many years they have other toys that consumers would hopefully buy so for Mattel sake maybe consumers will do a marginal rate of substitution. Using marginal rate of substitution usually means how much of x is the consumer willing to give up for one more unit of y, but in the case of the Mattel toys, since the x unit was taken away in the recall, hopefully the consumer will be just as satisfied with accepting the y