Chicken Price Shoots Up !

The article (http://nation.time.com/2012/10/01/bacon-shortage-baloney-but-prices-to-rise/ ) that I have chosen is about the price of chickens that has gone up in the market. The price of chicken that has been previously set was RM7 has gone up to RM8.50. One of the reasons why the cost of chickens has risen is because of the prices of corn and soya bean has also increased. Corn and soya bean are able to affect the price of the chicken as these goods are used to feed them. Besides that, chickens are facing slow growth due to the low quality of feed.

Demands are wants that are craved by people to satisfy their never ending yearnings to get a product or a service. The amount of goods or services that is sold at a certain price at a certain time that is wanted by the consumers is called quantity demanded. Sometimes, the quantity that is demanded that is requested by the consumers cannot be fulfilled as the goods demanded exceeded the goods available. Therefore there is a presence of shortage. Based on this article chosen, corn and soya bean that has been used to feed the chicken has been increased caused the price of the chicken to also rise. Due to the rise of the cost of the corn and soya bean, the supplier has to decrease their quantity supply of the chicken as fewer consumers will purchase them due to the high price and to ensure they avoid the problem of surplus.

Quantity demanded can be measured as a quantity of a good at a time. The law of demand is when the quantity demanded is low due to the high price of a good, and when the price of a good is low, the quantity demanded rises. In this case, to relate this article with the law of demand, as the price of the chicken is high, the demand of the chicken will then be low. Therefore, there the price and the quantity demanded will have a negative relationship.

There are two effects that makes the high price of a good reduce the quantity demanded which is Substitution to effect and Income effect. Substitution effect is when other things are constant when a price of a good increases. Thus, its relative price will be its opportunity cost. Every good has its substitution, therefore when a price of good increases, the substitution good will then be an opportunity cost. If the prices of the chicken increase while other things remains constants, many consumers will turn to the second choice, for example duck, lamb and many more. Therefore, chicken will be the opportunity cost of the other chosen product. As for the income effect, when the price of a good increases, other things will also remain the same. If a cost of good rises, consumers that earn low income will not be able to afford those goods and consequently decrease their demand of a quantity. Based on this article, everything will also remain constant, price of the chicken rises then those consumers who are not so fortunate will not be able to afford these goods.

            Supply is the good or services produced by the supplier or the producer. As long as there are resources and technologies, a good or service can be produced. With supply produced, the suppliers or producers are able to make some profit. The law of supply occurs when the higher price of a good, the bigger the quantity supplied or when the price of a good is low, the lesser the quantity supplied. 

In my opinion, as s supplier, if the cost of the chicken has gone up, I’d decide to supply more chicken, without even observing the price or corn and soya. I would choose to supply more chicken due to the marginal cost increase.  Marginal cost means obtaining an opportunity cost from producing one more unit of a product. Personally in my opinion, if a price of the chicken’s production costs higher than the market’s price, I would say that it is not worth producing it as there would be cost to cover the marginal cost. Besides that, most consumers will compare prices in the market and thus not all consumers will choose to buy the chicken that is more costly.

According to the article, there are many factors that have affected the supply of the chicken. One of the factors is the food supply and the increase in price. If the price increases, the return from selling the goods will increase and therefore causes the supply to rise. Next, global warming, changes in climate and energy security has also the power to influence the supply of the chicken. Global warming decreases the supply, while good climate increases the supply of the goods. Therefore, when the supply increases, the supply curve shifts to the right, and when the supply decreases, the supply curve shifts to the left.

There are two types of price controls which are price ceiling and price floor. Price floor means legislated minimum on the price where the price of the goods cannot be lower than a certain level. On the other hand, price ceiling is when a price that is not allowed to rise above a certain level, which is the legal maximum on a price where a goods should be retailed. Price ceiling is able to relate with the article that I’ve chosen where in this article, the price of the chicken has risen from Rm7 to RM8.50. Thus, the cost of the chicken has risen up higher than the market equilibrium. Graph A below shows the prices ceiling of the chicken that is not binding. Meanwhile, graph B shows the price ceiling that is binding, where it is how the price of the chicken is supposed to be.

          

In conclusion, in order for the price of the chicken to fall, a reduction in price in both corn and soya bean should be decreased.. With this method used, I hope that the price of chicken will be stable so that consumers whether rich or poor will be able to afford buying the chicken without having to fear that the chicken price will shoot up.