South-Western College Publishing - Economics  
Chinese Toymakers’ Losses Are US Toymakers’ Gains
Topic Supply and Demand; Equilibrium
Key Words toys, China, US, lead, paint, quality, demand
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Reference ID: A167606725

News Story In the wake of the massive recalls of Chinese-made toys that were discovered to have lead paint on them, US-based toy manufacturers are reaping the benefits of painting with lead-free paint.

About 80% of all toys sold in the US are made in China, so US-made toys tend to be sold online or in smaller specialty toy shops around the country. The scare that the recalls have put into parents’ minds is causing several consequences for US toy makers and retailers.

Manufacturers are seeing an upswing in demand for their products. Whittle Shortline Railroad, a company that makes wooden trains, has seen inquiries about its use of pain on its toys skyrocket, and demand for its product increase by 40% in the last two months. Other US manufacturers are experiencing similar activity.

The specialty stores that stock trains like those produced by Whittle Shortline Railroad also tend to more expensive, eclectic toys, and have always sought to differentiate themselves from the mass-market retailers. Even still, many of these stores are experiencing an upsurge in purchases of their products. And while some indicate that they have not yet been affected by the toy recalls, most accept that things will be different around Christmastime. Even if they are not affected now, they will see demand for their products increase then; parents tend not to forget about such things.

Questions
Discussion Questions:
1. Assuming parents do not forget about the problems with Chinese-made toys as the holiday season approaches, what do you expect to happen to the price of those toys? Why?
2. What would you expect to happen to the price of Chinese-made toys as these production issues (i.e, the use of paint with lead) are eliminated? Why?
3. Are these recalls making US-made toys more or less competitive with Chinese-made toys? Why?
Multiple Choice/True False Questions:
1. US-made and Chinese-made toys can be considered
  1. Substitute goods
  2. Complementary goods
  3. Luxury goods
  4. Necessary goods
2. According to this article, the price of US-made toys can be expected to
  1. Increase.
  2. Decrease.
  3. Stay the same.
  4. Become more expensive than most people can afford.
3. One can expect the price of US-made toys to fall again around Christmastime.
  1. True
  2. False
Source Martin, Andrew. “U.S.-Made Toys Benefit From China’s Troubles.” The New York Times, August 15, 2007.
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