Economics for Business

Economics for Business, Project 2

Matej Slivonik

Student number: 13228484

Question 1:

In this question the price of seafood is discussed. As was written in the Case Study 1, generally, the most of changes in the price is a response to the changes to demand and supply. Over the times most of the seafood had been becoming more demanded since the more luxurious restaurants started to offer this food as a delicacy for example. A higher demand means logically a higher price. If we are talking about the abalone from our example nowadays it could be considered as a gourmet food, therefore, it is natural that the price has to be higher than the ordinary food. Overall, the higher demand of the abalone caused the higher price of this seafood.

In the case of oysters the situation was similar compared to the development of the Abalone. Throughout 1960 – 1980 raw oysters became more and more demanded; therefore the price was also increasing. Then the selling the oysters has become very profitable business so this caused an increase in a number of producers (higher supply) and according to Gans, King and Mankiw "any change that raises the quantity that sellers wish to produce at a given price shifts the supply curve to the right" that means after the increase of producers in 1980 the price has become steady.

In recent years it is observed that oysters have been dying out due to serious illness. This means that the supply is declining so the price on the contrary is increasing.

Question 2:

Yes, it is possible, but this decrease in demand is caused by two different reasons. During 1950 -1975 the price increases then the quantity falls so there is a movement along the demand curve. However, in the second case (Graph 2) 1970 – 2000 there is no change in price but the quantity of the fish sold decreases therefore there is shift in the demand curve.

Graph 1 A movement along the demand curve (source: http://www.freeworldacademy.com/newbizzadviser/fw4.htm)

Graph 2 A shift in the demand curve (source: http://www.extension.iastate.edu/agdm/wholefarm/html/c5-204.html)

Question 3:

As a result of the regulation there will be smaller supply but no change in demand therefore the supply curve will be shifted to the left → the equilibrium price will raise and the quantity will decline.

Case Study 2

Question 1:

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