Question

Marina is a coastal city with a vibrant tourist industry. Oysters from local seafood restaurants are very popular with both locals and tourists. Recent events related to the Covid-19 disease resulted in a severe shortage of migrant farmworkers who process (chuck) the shellfish before they are sold to restaurants in the city. In addition, most of the restaurants that sell shellfish are closed due to the lockdown and lack of tourists.

a)   Explain, with graphs and words, the expected short-run effects of the above events on the market for oysters. Your explanation should include the effects, if any, on demand, supply, price, and quantity (20 points).

b)   What do you expect to happen in the market in the long-run (5 points)?

Answer 1

a)

due to covid-19 supply of oyster reduces as shellfish restaurants are closed and there is shortage of workers so supply curve of oyster shift left ward from AS to AS₁ and output decreases from Y to Y₁ and price of oyster increases from P to P₁ and equilibrium level shift upward from E to E₁.

b)In long run supply of oyster decreases and also due to COVID-19 pandemic demand for oyster also decreases because of lock down people are not able to go to the restaurants and demand for oyster decreases also workers are not able to deliver the shellfish so supply also decreases output decreases with same price level.

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