Download Supply and Demand - David E. Harrington

9/10/2013
Supply and Demand:
The Market for Atlantic Bluefin Tuna (ABT)
All Buyers and Sellers of ABT
Tuna auction
at the Tsukiji
fish market.
Cold waters of North Atlantic
create extra layers of fat
giving BFT a “rich, silky
flavor.”
Nicknamed “flying fish” because it travels
in jets to Japan
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Demand Curve: Relationship between Price and
Quantity Demanded (QD)
holding other factors constant
Price
Quantity Demanded
($ per lb) (Millions of lbs per year)
40
20
30
60
20
100
10
140
Demand for ABT, 1995
WTP5
Price
($ per lb)
Quantity Demanded
(Millions of lbs per year)
40
20
30
60
20
100
10
140
D1995
WTP5 = max
willingness to pay
for the 5th million lb
(e.g., gourmet sushi
restaurants).
WTP170
Quantity (millions of lbs per year)
WTP170, e.g., cat
food producers
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Law of Demand
PABT   QD ceribus paribus… need only be
true on average
KAY-tuhr-uhs PAR-uh-buhs
Change
Example
 in the
P of the
good
itself
 PABT
Illustrated
Movement
along the
demand
curve
Terminology
 in
“quantity
demanded”
Change in Price of Good Itself
 PABT causes  QD
PABT
Illustrated by
movement along D
P2
P1
D
Q2
Q1
QABT
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Effects of Other Changes
Change
Example
Any
other
factor
↑ PSake
Illustrated
Terminology
Shift in
Demand
 “Demand”
for Atlantic
Bluefin Tuna
Sake & ABT are
complements if
↑Psake   DABT
Demand Shifts
PABT
 PSake causes  in DABT,
illustrated by a leftward shift in
demand
P
D2
Q2
Q1
D1
QABT
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Determinants
of Demand
Example
1. Price of
Good itself
PABT   in QD
2. Prices of
Related Goods
(a) Complements
PSake   DABT
A California sushi chef discovered that the “oily texture of
avocado” is a “perfect substitute for toro” (Wikipedia).
Avocado Rolls
Toro Rolls
Avocados (A) & ABT are
substitutes if
↑PA  ↑ DABT
Tuna Toro with
Avocado Tower
Avocados (A) & ABT
are complements if
↑PA   DABT
Whether Avocados & ABT are substitutes or
complements is an empirical issue.
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Determinants
of Demand
1. Price of
Good itself
Example
PABT   in QD
2. Prices of
Related Goods
(a) Complements
(b) Substitutes
Determinants
of Demand
PSake   DABT
PAvocados   DABT
Example
3. Income (Y)
Normal Good:
Y   D
Inferior Good:
 Y   DVanity Plates
 Y  D
Vanity Plates are a normal
good and 68 Subarus were
an inferior good.
 Y   D68 Subaru
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Determinants
of Demand Example
4. Number
of Buyers
Aging of Boomers
  DCremations
5. Tastes
Catholic Church
1963: sanctioned C
1997: C allowed at
Catholic Mass
  DCremations
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