Supply and Demand Examples of Food
Being one of the core ideas of economics, we know that when a certain product has a low supply and a high demand that it will almost always cost a lot monetarily. An example of this could be beluga sturgeon caviar, which is generally considered the most expensive form of caviar with prices ranging from $3200-$4500 per pound. The supply is incredibly limited because of several factors. First; the beluga sturgeon is a critically endangered species, hence its eggs are very rare in themselves. Second; due to its critically endangered status, beluga fish and beluga caviar are banned from being imported to certain countries in order to protect the species. Some countries have even outright banned the harvesting and consumption of beluga caviar. Third; beluga sturgeon take twenty years to reach maturity and hence are able to actually lay eggs. The reasoning for beluga caviar's incredible demand is a little less obvious but from what I have seen most of it is generated by its exclusivity, status, and unique taste. With these facts in mind it is obvious as to why caviar, especially beluga caviar is so expensive but what are some examples of products that have high demand and high supply, low demand and high supply, or do not fit the typical supply-demand pattern at all?
Why not use another food item as an example of supply and demand. On the complete other end of the food spectrum, there is rice. Rice is a prime example of high demand and high supply, people want rice (many cultures completely sustaining themselves on it), but it is also so cheap and efficient to produce that we have an excess of supply. This results in rice being valued as one of, if not the cheapest foods. After thinking for a bit I realized that both of these examples are possible and follow the simple supply-demand formula because their demand is elastic. If caviar or rice becomes too expensive their demand will decrease, that theoretical price increase could be attributed to a decrease in supply. For example, if we somehow managed to find a way to mass produce beluga caviar, its supply would obviously increase but additionally, due to that supply increase; the exclusivity and prestige factor that generates its high demand will also decrease, hence the elastic price will decrease along with the elastic demand.
This brings me to my final point and answer to my earlier question of what could possibly break the typical supply-demand formula. If the demand for a product is inelastic, that means no matter the price or supply, the demand for the said product will not change at all or only marginally change. We will use food as another example. If we look at pre-industrial Europe, bread was undoubtedly an indispensable resource for the common peasant. Many millions lived off of only bread as a food source and hence the demand for bread would remain forever high since there was no alternative or viable food source and it was required to live. No matter the supply and costs the bread would reach, peasants would always be willing to shell out everything they owned for it. If the wheat crop did well, and hence a lot of wheat was produced we would see a high supply and high demand but that demand would remain high no matter how high a price was charged for the bread. Meaning some sort of feudal lord could distribute bread while at high supply at a price you would typically see it when supply was scarce. If we used some real-world examples, bread supply was low during the French Revolution and hence was a considerable price; following the typical supply-demand formula. On the flip-side, if we use Ireland during the potato famine or India during its great famine as examples, despite potential supplies of food being high (non-infected potato crop in Ireland, corn in India), the populations still paid incredibly high prices as their demand never fell and suffered the consequences if they could not offer up the price. Potato that could be fed to the starving Irish was rather exported back to Britain so they English landowners could sell it at a higher price than the Irish farmers could pay, and in India neglect and administrative issues during World War Two lead to the extensive supply of corn not being realized and hence distributed at a fair cost equal to its supply. It is very interesting how the different theories of economics collide and affect each other, and more interesting the real historical events of thereof in practice.
Sources;
https://en.wikipedia.org/wiki/Caviar
https://en.wikipedia.org/wiki/Beluga_caviar
https://www.quora.com/Why-do-people-like-eating-caviar
Why not use another food item as an example of supply and demand. On the complete other end of the food spectrum, there is rice. Rice is a prime example of high demand and high supply, people want rice (many cultures completely sustaining themselves on it), but it is also so cheap and efficient to produce that we have an excess of supply. This results in rice being valued as one of, if not the cheapest foods. After thinking for a bit I realized that both of these examples are possible and follow the simple supply-demand formula because their demand is elastic. If caviar or rice becomes too expensive their demand will decrease, that theoretical price increase could be attributed to a decrease in supply. For example, if we somehow managed to find a way to mass produce beluga caviar, its supply would obviously increase but additionally, due to that supply increase; the exclusivity and prestige factor that generates its high demand will also decrease, hence the elastic price will decrease along with the elastic demand.
This brings me to my final point and answer to my earlier question of what could possibly break the typical supply-demand formula. If the demand for a product is inelastic, that means no matter the price or supply, the demand for the said product will not change at all or only marginally change. We will use food as another example. If we look at pre-industrial Europe, bread was undoubtedly an indispensable resource for the common peasant. Many millions lived off of only bread as a food source and hence the demand for bread would remain forever high since there was no alternative or viable food source and it was required to live. No matter the supply and costs the bread would reach, peasants would always be willing to shell out everything they owned for it. If the wheat crop did well, and hence a lot of wheat was produced we would see a high supply and high demand but that demand would remain high no matter how high a price was charged for the bread. Meaning some sort of feudal lord could distribute bread while at high supply at a price you would typically see it when supply was scarce. If we used some real-world examples, bread supply was low during the French Revolution and hence was a considerable price; following the typical supply-demand formula. On the flip-side, if we use Ireland during the potato famine or India during its great famine as examples, despite potential supplies of food being high (non-infected potato crop in Ireland, corn in India), the populations still paid incredibly high prices as their demand never fell and suffered the consequences if they could not offer up the price. Potato that could be fed to the starving Irish was rather exported back to Britain so they English landowners could sell it at a higher price than the Irish farmers could pay, and in India neglect and administrative issues during World War Two lead to the extensive supply of corn not being realized and hence distributed at a fair cost equal to its supply. It is very interesting how the different theories of economics collide and affect each other, and more interesting the real historical events of thereof in practice.
Sources;
https://en.wikipedia.org/wiki/Caviar
https://en.wikipedia.org/wiki/Beluga_caviar
https://www.quora.com/Why-do-people-like-eating-caviar
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