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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”.

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Supply and Demand: The Market for Atlantic Bluefin Tuna (ABT)

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Supply and demand the market for atlantic bluefin tuna abt

Supply and Demand: The Market for Atlantic Bluefin Tuna (ABT)

All Buyers and Sellers of ABT

Tuna auction at the Tsukiji fish market.


Supply and demand the market for atlantic bluefin tuna abt

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


Demand curve

Demand Curve:

Relationship between Price and Quantity Demanded (QD) holding other factors constant

Price

Quantity Demanded

($ per lb)

(Millions of lbs per year)

20

40

60

30

20

100

10

140


Supply and demand the market for atlantic bluefin tuna abt

Demand for ABT, 1995

Price

Quantity Demanded

($ per lb)

(Millions of lbs per year)

WTP5 = max willingness to pay for the 5th million lb (e.g., gourmet sushi restaurants).

WTP5

D1995

WTP170

WTP170, e.g., cat food producers

Quantity (millions of lbs per year)


Supply and demand the market for atlantic bluefin tuna abt

Law of Demand

PABT QD ceribus paribus… need only be true on average

KAY-tuhr-uhs PAR-uh-buhs

Change

Example

Illustrated

Terminology

 in the P of the good itself

 PABT

Movement along the demand curve

 in “quantity demanded”


Change in price of good itself

Change in Price of Good Itself

 PABT causes  QD

PABT

Illustrated by movement along D

P2

P1

D

QABT

Q2

Q1


Effects of other changes

Effects of Other Changes

Change

Example

Illustrated

Terminology

Any other factor

 “Demand” for Atlantic Bluefin Tuna

Shift in Demand

↑PSake

Sake & ABT are complements if

↑Psake  DABT


Demand shifts

Demand Shifts

PABT

 PSake causes  in DABT, illustrated by a leftward shift in demand

P

D2

D1

Q2

Q1

QABT


Supply and demand the market for atlantic bluefin tuna abt

Determinants of Demand

Example

1. Price of

PABT in QD

Good itself

2. Prices of

Related Goods

(a) Complements

PSake DABT


Supply and demand the market for atlantic bluefin tuna abt

A California sushi chef discovered that the “oily texture of avocado” is a “perfect substitute for toro” (Wikipedia).

Tuna Toro with

Avocado Tower

Avocado Rolls Toro Rolls

Avocados (A) & ABT are substitutes if

↑PA ↑ DABT

Avocados (A) & ABT are complements if

↑PA  DABT

Whether Avocados & ABT are substitutes or complements is an empirical issue.


Supply and demand the market for atlantic bluefin tuna abt

Determinants of Demand

Example

1. Price of

PABT in QD

Good itself

2. Prices of

Related Goods

(a) Complements

PSake DABT

(b) Substitutes

PAvocados DABT


Supply and demand the market for atlantic bluefin tuna abt

Determinants of Demand

Example

3. Income (Y)

Normal Good:

Y D

Y DVanity Plates

Inferior Good:

Y D

Vanity Plates are a normal good and 68 Subarus were an inferior good.

Y D68Subaru


Supply and demand the market for atlantic bluefin tuna abt

Determinants of Demand

Example

  • Number

  • of Buyers

Aging of Boomers

 DCremations

Catholic Church

1963: sanctioned C

1997: C allowed at

Catholic Mass

5. Tastes

 DCremations


Supply curve

Supply Curve:

Relationship between Price and Quantity Supplied (QS) holding other factors constant

Price

Quantity Supplied

($ per lb)

(Millions of lbs per year)

70

5

80

10

20

100

30

120


Supply and demand the market for atlantic bluefin tuna abt

Supply of ABT, 1995

Quantity Supplied

Price

($ per lb)

(Millions of lbs per year)

S1995

Quantity (millions of lbs per year)


Supply and demand the market for atlantic bluefin tuna abt

=min $ to get firms to

supply 80 million lbs of ABT

= opp cost (resources)

of 80th million lb of ABT

S1995

Quantity (millions of lbs per year)


Supply and demand the market for atlantic bluefin tuna abt

“In ports like Gloucester and Seabrook, furious bidding wars broke out, as representatives of Tsukiji auction houses handed thousands in cash to stunned anglers for their hauls… Lobstermen began to put down their traps and take up rods and reels, chasing lucrative catches on slow-moving dragger boats ill prepared for the task.”

“The One That Almost Got Away,” Boston Magazine, May 2007

Tuna (long net) Seiner

Lobster Dragger


Supply and demand the market for atlantic bluefin tuna abt

S1995

Opp cost of catching ABT using “dragger boats” is higher than with “tuna seiners”

Opp Cost120 >

Opp Cost80

opp cost  as Q

As Q, P must to induce  fishing boats pursuing ABT

Quantity (millions of lbs per year)


Supply and demand the market for atlantic bluefin tuna abt

Determinants of Supply

Example

1. Price of

 PABT in QS

Good itself

2. Price of

Inputs

PGas in SABT


Supply shifts

Supply Shifts

PGas in supply

, illustrated by a

leftward shift

PABT

S2

S1

P

Leftward shift--moving towards zero at every price

0

Q2

Q1

QABT


Supply and demand the market for atlantic bluefin tuna abt

Determinants of Supply

Example

3. Technological

Improvements

Better handling purse-seine nets

 in SABT

4. Price of Complements

in Production

 Supply of

PWhalebonedue to:


Supply and demand the market for atlantic bluefin tuna abt

Determinants of Supply

Example

5. Price of Substitutes

in Production

 Supply of

P of


Supply and demand the market for atlantic bluefin tuna abt

Market for Atlantic Bluefin Tuna, 1995

E = Market Equilibrium

S1995

no pressure to ∆ because buyers and sellers are 

Pe95

D1995

Qe95

Quantity (millions of lbs per year)


Supply and demand the market for atlantic bluefin tuna abt

In 1998, the Japanese economy “tanked” due to the Asian financial crisis, reducing the amount that wholesalers were willing to pay for Atlantic bluefin tuna (Boston Business Journal, September 11, 1998). Illustrate the effect on the market for ABT, assuming that the demand for ABT fell by 60 million lbs due to the Asian financial crisis.


Supply and demand the market for atlantic bluefin tuna abt

Market for Atlantic Bluefin Tuna, 1995-1998

DABT by 60 million lbs per year

Event:

Asian Crisis 

S1995= S1998

60

Pe95

Pe98

D1998

D1995

Qe98

Qe95

Quantity (millions of lbs per year)


Supply and demand the market for atlantic bluefin tuna abt

  • Over the 18 months from January 2006 to June 2007, people in Russia, South Korea and China developed a taste for sushi and dozens of countries reduced their catches of bluefin tuna by 20 percent to stabilize the bluefin tuna population. These two events caused

an increase in the quantity of bluefin tuna demanded and a decrease in the quantity of bluefin tuna supplied.

an increase in the quantity of bluefin tuna demanded and a decrease in the supply of bluefin tuna.

an increase in the demand for bluefin tuna and a decrease in the quantity of bluefin tuna supplied.

an increase in the demand for bluefin tuna and a decrease in the supply of bluefin tuna.


Supply and demand the market for atlantic bluefin tuna abt

2. The effect of these events on the market for bluefin tuna is best illustrated by

Price

($ per lb)

Price

($ per lb)

(a)

(b)

SJan06

SJan06

SJune07

SJune07

20%

20%

PJune07

PJune07

$130

$13

PJan06

PJan06

DJune07

DJune07

DJan06

DJan06

Quantity

QJune07

QJan06

Quantity

QJune07

QJan06

Price

($ per lb)

Price

($ per lb)

(c)

(d)

SJan06

SJan06

SJune07

SJune07

20%

PJune07

PJune07

$130

$13

PJan06

PJan06

DJune07

DJune07

20%

20%

DJan06

DJan06

Quantity

QJune07

QJan06

Quantity

QJune07

QJan06


Supply and demand the market for atlantic bluefin tuna abt

“Since the start of last year, the average price of imported frozen northern and Pacific bluefin has risen more than a third, to $13 a pound, according to Japan's Fisheries Agency.”.

─“Japan Adapts to Tuna Shortage: Waiter, There's Deer in My Sushi,” The New York Times, June 25, 2007


Supply and demand the market for atlantic bluefin tuna abt

3. The effect of these events on the market for avocadoes is best illustrated by

Price

SJune07

Price

SJan06

SJan06

SJune07

(a)

(b)

PJan06

PJune07

PJune07

PJan06

= DJune07

DJan06

DJan06

QJan06

QJune07

Quantity

QJune07

QJan06

Quantity

Price

Price

= SJan06

SJune07

SJan06

(c)

(d)

SJune07

PJune07

PJune07

DJune07

PJan06

PJan06

DJune07

DJan06

DJan06

QJune07

QJan06

Quantity

QJune07

QJan06

Quantity


Supply and demand the market for atlantic bluefin tuna abt

Pale skin

Conquering Scurvy in the 18th Century

Sunken Eyes

Connective tissue disease: body becomes “unglued”

Loss of teeth

In 1747, Lind ran an experiment on the sailors of the HMS Salisbury

Sick Sailors

James Lind

Limes

Other Common Treatments

Recovered Quickly

Got Sicker


Supply and demand the market for atlantic bluefin tuna abt

Market for Limes, 1794 - 1796

In 1795, the Royal Navy ordered sailors be given lime or lemon juice daily, causing them to be nicknamed limeys.

PLIMES

D1796

S1794

= S1796

D1794

T :quantity supplied

P96

R

T

R: quantity demanded

P94

Shortage

Buyers

Sellers

Q94

=QS

Q96

QD

QLIMES


Supply and demand the market for atlantic bluefin tuna abt

Buyers & Sellers

P = Pe

 QD= QS

Bid up

P < Pe

 Shortage

QS &

Buyers

Price

QD


Supply and demand the market for atlantic bluefin tuna abt

  • In 1747, the surgeon of the HMS Salisbury, James Lind, divided sailors sick with scurvy into groups, one of which was given limes to eat, another was given nutmeg and a third drank apple cider. Lind found that

only limes were effective at treating scurvy.

limes cured the disease but apple cider slightly improved the sailors’ health.

limes cured the disease but nutmeg slightly improved sailors’ health.

limes cured the disease but both apple cider and nutmeg slightly improved sailors’ health.


Supply and demand the market for atlantic bluefin tuna abt

  • James Lind later

developed a method of preserving lime juice for use at sea.

discovered that scurvy was due to a deficiency of vitamin A, which is provided by limes.

died of scurvy on a long voyage that ran out of lime juice.

discovered that cholera was a waterborne disease.


Supply and demand the market for atlantic bluefin tuna abt

Mother of Pearl Shells and World War I

In the early years of the 20th Century, the inner shell of sea oysters—called Mother-of-Pearl (MOP)—was used to create shirt buttons and to decorate jewelry boxes, revolvers and walking canes. Nearly all MOP was harvested off the coast of Australia by hundreds of oyster diving companies using boats called luggers.

Suppose the market for MOP reached long-run equilibrium in 1913.

In 1914, soldiers marched off to war confident that they would be home by Christmas. Few people anticipated the stalemate that would be created by trench warfare. As the war dragged on, fewer and fewer people wanted (and/or could afford) fancy buttons, walking sticks and jewelry boxes made of MOP. “By 1918, the price of mother-of-peral was so low that there seemed little point in sending the luggers out to sea” (The White Divers of Broome, p. 292).


Supply and demand the market for atlantic bluefin tuna abt

Market for MOP Shells, 1913-1918

PMOP

S1913

P1913

D1913

Q1913

QMOP


Supply and demand the market for atlantic bluefin tuna abt

Market for MOP Shells, 1913-1918

PMOP

S1913

=S1918

P1913

P1918

D1913

D1918

Q1913

Q1918

QMOP


Supply and demand the market for atlantic bluefin tuna abt

Market for MOP Shells, 1913-1918

PMOP

S1913

=S1918

P1913

P’

P1918

D1913

D1918

Q1913

Q1918

QMOP

Immediately after ↓D,

P= P’

Adjustment Process:

Shortage of

A B arises


Supply and demand the market for atlantic bluefin tuna abt

Market for MOP Shells, 1913-1918

PMOP

S1913

=S1918

A B

P1913

P’

P1918

D1913

D1918

Q1913

Q1918

Q1918

= Qs at P’

QMOP

Qd at P’

Immediately after ↓D,

P= P’

Adjustment Process:

Surplus of

A B arises

↑QD & ↓QS until new equilibrium is reached

↓P


Tri state crematory tsc scandal

Tri-State Crematory (TSC) Scandal

Two Events in 2002:

Tennessee

200 decomposing bodies discovered at TSC

Alabama

GA “reformed” law by requiring crematories to hire embalmers

“Government Six Feet Under”


Market for cremations 2001 2002

Market for Cremations 2001-2002

Predicted Outcome

PC

Δ P

Δ Q

S2002

?

S2001

P2001

D2001

GA law SC

D2002

TSC

DC

Scandal

Q2002

Q2001

QC


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