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Supply and Demand: The Market for Atlantic Bluefin Tuna (ABT). All Buyers and Sellers of ABT. Tuna auction at the Tsukiji fish market. Cold waters of North Atlantic create extra layers of fat giving BFT a “rich, silky flavor.”. Nicknamed “flying fish”. - PowerPoint PPT Presentation
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Supply and Demand: The Market for Atlantic Bluefin Tuna (ABT)
All Buyers and Sellers of ABT
Tuna auction at the Tsukiji fish market.
Nicknamed “flying fish” because it travels in jets to Japan
Cold waters of North Atlantic create extra layers of fat giving BFT a “rich, silky flavor.”
Demand Curve: Relationship between Price and Quantity Demanded (QD) holding other factors constant
Price Quantity Demanded($ per lb) (Millions of lbs per year)
40
30
20
20
60
100
10 140
Price Quantity Demanded($ per lb) (Millions of lbs per year)
40 20
30 60
20 100
10 140
Demand for ABT, 1995
Quantity (millions of lbs per year)
WTP5
WTP5 = max willingness to pay for the 5th million lb (e.g., gourmet sushi restaurants).
WTP170
WTP170, e.g., cat food producers
D1995
PABT QD ceribus paribus… need only be true on average
Change Example Illustrated Terminology
in the P of the
good itself
PABT Movement along the demand curve
in “quantity
demanded”
Law of Demand
KAY-tuhr-uhs PAR-uh-buhs
Change in Price of Good Itself
D
P1
P2
Q1Q2
PABT
QABT
PABT causes QD
Illustrated by movement along D
Effects of Other Changes
Change Example Illustrated Terminology
Any other factor
Shift in Demand
“Demand” for Atlantic
Bluefin Tuna↑ PSake
Sake & ABT are complements if ↑Psake DABT
Demand Shifts
D1
P
Q1Q2
PABT
QABT
D2
PSake causes in DABT, illustrated by a leftward shift in demand
Determinants of Demand Example
1. Price of PABT in QD
2. Prices of
(a) Complements PSake DABT
Good itself
Related Goods
A California sushi chef discovered that the “oily texture of avocado” is a “perfect substitute for toro” (Wikipedia).
Avocados (A) & ABT are complements if ↑PA DABT
Avocado Rolls Toro Rolls Tuna Toro with Avocado Tower
Avocados (A) & ABT are substitutes if ↑PA ↑ DABT
Whether Avocados & ABT are substitutes or complements is an empirical issue.
Determinants of Demand Example
1. Price of PABT in QD
2. Prices of
(a) Complements PSake DABT
Good itself
Related Goods
(b) Substitutes PAvocados DABT
Determinants of Demand Example
3. Income (Y)
Normal Good:
Inferior Good: Y DVanity Plates
Y D68 Subaru
Y D
Y D
Vanity Plates are a normal good and 68 Subarus were an inferior good.
Determinants of Demand Example
4. Number of Buyers
Aging of Boomers DCremations
Catholic Church 1963: sanctioned C
5. Tastes DCremations
1997: C allowed at Catholic Mass
Supply Curve: Relationship between Price and Quantity Supplied (QS) holding other factors constant
Price Quantity Supplied($ per lb) (Millions of lbs per year)
5
10
20
70
80
100
30 120
Price Quantity Supplied($ per lb) (Millions of lbs per year)
5 70
10 80
20 100
30 120
Supply of ABT, 1995
Quantity (millions of lbs per year)
S1995
Quantity (millions of lbs per year)
S1995
= min $ to get firms to
= opp cost (resources)
supply 80 million lbs of ABT
of 80th million lb of ABT
“In ports like Gloucester and Seabrook, furious bidding wars broke out, as representatives of Tsukiji auction houses handed thousands in cash to stunned anglers for their hauls… Lobstermen began to put down their traps and take up rods and reels, chasing lucrative catches on slow-moving dragger boats ill prepared for the task.”
“The One That Almost Got Away,” Boston Magazine, May 2007
Lobster DraggerTuna (long net) Seiner
Quantity (millions of lbs per year)
S1995Opp cost of catching ABT using “dragger boats” is higher than with “tuna seiners”
Opp Cost120 >
Opp Cost80
opp cost as Q
As Q, P must to induce fishing boats pursuing ABT
Determinants of Supply Example
1. Price of PABT in QS Good itself
2. Price of Inputs
PGas in SABT
Supply Shifts
S1
P
Q1Q2
PABT
QABT
S2
PGas in supply , illustrated by a leftward shift
0
Leftward shift--moving towards zero at every price
Determinants of Supply Example
3. Technological Improvements
Better handling purse-seine nets
4. Price of Complements in Production
PWhalebone due
to:
Supply of
in SABT
Determinants of Supply Example
5. Price of Substitutes in Production
Supply ofP of
Quantity (millions of lbs per year)
D1995
S1995
Pe95
Qe95
Market for Atlantic Bluefin Tuna, 1995
E = Market Equilibriumno pressure to ∆ because buyers and sellers are
In 1998, the Japanese economy “tanked” due to the Asian financial crisis, reducing the amount that wholesalers were willing to pay for Atlantic bluefin tuna (Boston Business Journal, September 11, 1998). Illustrate the effect on the market for ABT, assuming that the demand for ABT fell by 60 million lbs due to the Asian financial crisis.
Quantity (millions of lbs per year)
D1995
S1995= S1998
Pe95
Qe95
Market for Atlantic Bluefin Tuna, 1995-1998
Event: DABT by 60 million lbs per year
Asian Crisis
D1998
60
Pe98
Qe98
1. Over the 18 months from January 2006 to June 2007, people in Russia, South Korea and China developed a taste for sushi and dozens of countries reduced their catches of bluefin tuna by 20 percent to stabilize the bluefin tuna population. These two events caused
a) an increase in the quantity of bluefin tuna demanded and a decrease in the quantity of bluefin tuna supplied.
b) an increase in the quantity of bluefin tuna demanded and a decrease in the supply of bluefin tuna.
c) an increase in the demand for bluefin tuna and a decrease in the quantity of bluefin tuna supplied.
d) an increase in the demand for bluefin tuna and a decrease in the supply of bluefin tuna.
DJan06
DJune07
Price ($ per lb)
PJan06
PJune07
QJan06QJune07
SJune07SJan06
20%
$130
Price ($ per lb)
PJan06
PJune07
QJan06QJune07
SJune07SJan06
20%
$13
Quantity Quantity
DJan06
DJune07
Price ($ per lb)
PJan06
PJune07
QJan06QJune07
SJune07SJan06
20%
$130
Price ($ per lb)
PJan06
PJune07
QJan06QJune07
SJune07SJan06
20%
$13
Quantity Quantity
20%
(a) (b)
(c) (d)
2. The effect of these events on the market for bluefin tuna is best illustrated by
DJune07
DJan06
DJune07
DJan06
“Since the start of last year, the average price of imported frozen northern and Pacific bluefin has risen more than a third, to $13 a pound, according to Japan's Fisheries Agency.”.
─“Japan Adapts to Tuna Shortage: Waiter, There's Deer in My Sushi,” The New York Times, June 25, 2007
3. The effect of these events on the market for avocadoes is best illustrated by
DJan06
Price
PJan06
PJune07
QJan06QJune07
SJune07SJan06
Quantity
(a)
DJan06 = DJune07
Price
PJune07
PJan06
QJune07QJan06
SJan06SJune07
Quantity
(b)
DJan06
Price
PJan06
PJune07
QJan06QJune07
SJune07= SJan06
Quantity
(c)
DJune07
DJan06
Price
PJan06
PJune07
QJan06QJune07
SJan06
Quantity
(d)
DJune07
SJune07
Loss of teeth
Pale skin
Sunken Eyes
Conquering Scurvy in the 18th Century
Connective tissue disease: body
becomes “unglued”
James Lind
In 1747, Lind ran an experiment on the sailors of the HMS Salisbury
Recovered Quickly
Limes
Sick Sailors
Other Common Treatments
Got Sicker
S1794D1794
D1796
Shortage
Buyers
PLIMES
QLIMES
T R
= S1796
Q96
P94
Q94 QD
P96
Sellers
T : quantity supplied
R: quantity demanded
Market for Limes, 1794 - 1796
=QS
In 1795, the Royal Navy ordered sailors be given lime or lemon juice daily, causing them to be nicknamed limeys.
P < Pe
P = Pe
Shortage
QD= QS
Bu
yers
Buyers & Sellers
Bid up Price QS &
QD
1. In 1747, the surgeon of the HMS Salisbury, James Lind, divided sailors sick with scurvy into groups, one of which was given limes to eat, another was given nutmeg and a third drank apple cider. Lind found that
a) only limes were effective at treating scurvy.
b) limes cured the disease but apple cider slightly improved the sailors’ health.
c) limes cured the disease but nutmeg slightly improved sailors’ health.
d) limes cured the disease but both apple cider and nutmeg slightly improved sailors’ health.
1. James Lind later
a) developed a method of preserving lime juice for use at sea.
b) discovered that scurvy was due to a deficiency of vitamin A, which is provided by limes.
c) died of scurvy on a long voyage that ran out of lime juice.
d) discovered that cholera was a waterborne disease.
Mother of Pearl Shells and World War I
In the early years of the 20th Century, the inner shell of sea oysters—called Mother-of-Pearl (MOP)—was used to create shirt buttons and to decorate jewelry boxes, revolvers and walking canes. Nearly all MOP was harvested off the coast of Australia by hundreds of oyster diving companies using boats called luggers.
Suppose the market for MOP reached long-run equilibrium in 1913.
In 1914, soldiers marched off to war confident that they would be home by Christmas. Few people anticipated the stalemate that would be created by trench warfare. As the war dragged on, fewer and fewer people wanted (and/or could afford) fancy buttons, walking sticks and jewelry boxes made of MOP. “By 1918, the price of mother-of-peral was so low that there seemed little point in sending the luggers out to sea” (The White Divers of Broome, p. 292).
Market for MOP Shells, 1913-1918
PMOP
QMOP
S1913
D1913
P1913
Q1913
Market for MOP Shells, 1913-1918
PMOP
QMOP
S1913
D1913
P1913
Q1913
P1918
Q1918
=S1918
D1918
Market for MOP Shells, 1913-1918
PMOP
QMOP
S1913
D1913
P1913
Q1913
P1918
Q1918
=S1918
P’
D1918
Adjustment Process:
Immediately after ↓D,
P= P’→ Shortage of
A B arises
Market for MOP Shells, 1913-1918
PMOP
QMOP
S1913
D1913
P1913
Q1913
P1918
Q1918
=S1918
P’
D1918
Q1918
Adjustment Process:
Immediately after ↓D,
P= P’→ Surplus of
A B arises
Qd at P’ = Qs at P’
A B
→ ↓P → ↑QD & ↓QS until new equilibrium
is reached
Tri-State Crematory (TSC) Scandal
Two Events in 2002:
GA “reformed” law by requiring crematories to hire embalmers
200 decomposing bodies discovered at TSC
“Government Six Feet Under”
Tennessee
Alabama
Market for Cremations 2001-2002
Predicted Outcome
D2002
S2002
S2001
D2001
Q2002 Q2001 QC
PC
P2001
Δ P Δ Q
?
GA law SC
ScandalTSC DC