On 10 June 2015 CNN Money reported that a bird flu outbreak resulted in 35 million of the more than 300 million egg-laying birds in the country being killed. The following questions explore the effects of this event on the market for eggs in a carton in grocery stores.
1. Which eggs demand and/or supply determinant(s) is/are affected? Price of good related in consumption – substitute (mayonnaise, salad dressings) which is a demand determinant.
2. What would be the effect, i.e., direction of change, on the demand and supply of eggs? Decrease in demand, Increase in supply.
3. With a carefully labeled diagram (label axes, original and new curves, original and new equilibrium prices and quantities), illustrate the effects of this event on the market for eggs.
4. What will be the effects, i.e., direction of change, of this event, ceteris paribus, on the equilibrium price and quantity of eggs?