Question

6. There was a large jump in shrimp prices in the mid-1970s. A newspaper writer wondered why, if people refused to buy shrimp at those outrageous prices, the prices, the pries wouldn’t come down. The President of the National Fisheries Institute replied, “Under basic economics the price should drop as people like you and me reduce our demand for shrimp because we can’t afford it. But the laws of economics don’t stand up in the marketplace where the product is becoming increasingly scarce.” Do you agree with the President’s analysis? Explain.

Answer 1

There was a large jump in shrimp prices in the mid 1970's. A newspaper writer wondered why if people refused to buy shrimp at those outrageous prices , the prices would n't come down .That means even if the demand for shrimp reduces , the price of shrimp would not decline. Under economic theory, prices should be come down if people reduce their demand and because common people can't afford the shrimp at higher prices But in these case, prices of shrimp would be higher even people reduce their consumption. Because the shrimp is becoming increasingly scarce. Scarce resource will be selling at higher prices. So the sellers of shrimp know that demand will not be reduced at higher rate even they increased the price of shrimp. Because it is very scarce. So they know that even if they rise the price of shrimps demand will not reduce at considerable amount. The price of shrimp is very high because worldwide shrimp provides square measure alteration because of the unfolding of one thing referred to as early mortality syndrome. The food of shrimp varies and it is not so easy for keeping and breeding. It is highly expensive.