Question

A pandemic induced shutdown of several poultry processing plants will cause the price of live poultry to decrease and the price of poultry products in supermarkets to increase. [Hint: Assume both markets are characterized by supply and demand.]

Answer 1

A pandemic induced shutdown of several poultry processing plants will cause the price of live poultry to decrease as the plants which used to process them are shut down, thus the quantity of live poultry available in the market will increase, whereas demand for the live poultry will reduce as plants are shut. Thus quantity supplied will be more than quantity demanded which is why the price of live poultry will reduce.

Whereas the price of poultry products in supermarkets will increase as poultry is not being processed and made into poultry products. Thus the supermarkets are not getting any supply of poultry products in their stores due to the plant shutdowns. This means that the quantity supplied to supermarkets is low whereas the quantity demanded would be high as people are visiting and making purchases of commodities from the super markets. Thus this will increase the price of the poultry products.

Thus in the case of live poultry price will reduce as there is no demand for them from processing plants. Qs > Qd in the case of live poultry.

Whereas the price of poultry products would increase as they are in short supply in supermarkets because of the processing plants being shut. Qd > Qs