Interaction of Demand and Supply
Demand and supply in the egg market are influenced by several factors such as price fluctuations and seasons. For instance, when the eggs get expensive, the demand declines, and the supply level decreases with the hope to stabilize the value of eggs. Moreover, when there is a disease outbreak such as an avian influence outbreak, both the demand and supply of eggs significantly decline.
A movement in the demand and supply curves only arises when there is a price change, and it remains on the same curve. On the other hand, a shift in the demand and supply curves occurs when there is a non-price determinant including changes in trends. Movements and shifts in demand are associated with tastes, population and demographics, tastes, and expected future prices (Becker, 2017). Moreover, movements and shifts in supply are influenced by technological inputs, prices of inputs, and prices of related goods in production.
Businesses have reacted to the shifts in demand and supply of eggs by cutting back the size of their flocks. The U.S data show that chickens have dropped from 376 million to 371 million. The businesses are motivated by the overabundance of eggs which means that they are unprofitable right now.
The philosophy demonstrates that whenever prices of inputs increase, the price of products is elevated in the short term, forcing buyers to hold off on purchases, thus causing prices to fall. Conversely, when the prices of inputs are low, the prices decline in the short term, forcing businesses to hold-back their commodities thus leading prices to rise once again.
The demand for cage-free eggs was brought about by the low supply of eggs in the market, as businesses had cut back their stock size due to the Avian Influenza outbreak. The cage-free eggs made farmers and businesses to incur losses (Sumner et al., 2010).
Becker, G. S. (2017). Economic theory. Routledge.
Sumner, D. A., Matthews, W. A., Thurman, W. N., Hayes, D. J., Gow, H., & Norwood, B. (2010). Economic and market issues on the sustainability of egg production in the United States: Analysis of alternative production systems (No. 31542). Iowa State University, Department of Economics. Retrieved from https://ideas.repec.org/p/isu/genres/31542.html