Microeconomics Report: Demand, Supply, Elasticity in US Egg Market

This report provides a comprehensive microeconomic analysis of the US egg market, focusing on key concepts such as demand and supply, market equilibrium, and elasticity. The analysis examines the relationship between price and quantity demanded, illustrating the law of demand and the factors influencing demand shifts. It explores supply dynamics, including factors affecting supply curves and the concept of market equilibrium. The report delves into the elasticity of demand, particularly the inelastic demand for eggs, and its implications for total revenue. The analysis uses real-world data, including per capita consumption statistics and price fluctuations in the US egg market, to illustrate these microeconomic principles. The report concludes by highlighting the importance of demand and supply in achieving market equilibrium and the impact of price elasticity on market outcomes. The report also discusses the impact of events such as the avian flu outbreak on the market.

Microeconomics articles analysis

Contents
INTRODUCTION...........................................................................................................................3
Analysis of Articles.........................................................................................................................3
1. Demand and supply market equilibrium..................................................................................3
2. Elasticity measurements and determinants..............................................................................6
CONCLUSION................................................................................................................................7
REFERENCES................................................................................................................................7

INTRODUCTION
Microeconomics concept have crucial role in demand and supply of goods in the market.
Present report deals with economic analysis of US egg market which has high demand of
customers and shortage of quantity supplied is present.
Analysis of Articles
1. Demand and supply market equilibrium
Demand and supply are two factors which effectively decides willingness of customers to
buy goods in the market. The term willingness of customers initiates demand in the market
which is affected by various factors mainly is price. In this aspect, law of demand can be
enumerated that implies that when price of commodities decreases, quantity demanded increases
and vice-versa. This clearly shows that quantity demanded and price have inverse relationship as
when factor increases, other one decreases (Baumol and Blinder, 2015). Non-price factors lead
to change in market demand of the products. These includes price of related goods, tastes and
preferences of customers and other factors as well. Supply and demand is the fundamental
concept of economics.
Demand refers to what amount of quantity of product and services desire by customer.
And supply is the amount of a certain good producers are willing to supply. The relation between
demand and supply the forces behind the allocation of resources. The law of demand refers that
higher the price of a good, the lower the quantity demand. If the prices goes down of the goods,
higher demanded the goods. The law of supply refers that higher the price, higher the quantity
supplied. In this producers supply more because customer can purchase the product at higher
price.
The law of demand results from substitution effect and income effect. The demand curve
shows relationship between quantity demanded and goods price. Demand and supply depends on
the market price. So the market price goes down the supply will be high. And the market price
for a product is high the demand of the product is low. The US eggs market do a market research
for its company. So when eggs rate high the demand of the egg is low, and when eggs price goes
down its supplied would be high. There are some main factors that change demand these are,
income, population, preferences, price of related goods, expected future price (Friedman, 2017).
Demand curves goes downward. If the price of a goods remain same but one of the other factor

influence the buyers so demand curve shift increases. There are some factors that can change the
supply these are technology, expected future prices, prices of related goods. In the supply if used
advance technology so the energy bars increases and curve shifted rightward.
Market equilibrium is a situation in which both supply and demand balance each other. In
a market equilibrium occurs when both buyers and sellers balances price. The total amount of a
good that buyers choose to purchase under this condition income and wealth. A demand curve is
a graphical representation of the relationship between price and quantity demand. And the
supply curve is a relationship between price and quantity supplied. In supply curve if the price of
a factor of production rises so the curve shift leftward. If an improvement in technology it leads
the curve shifted rightward. If rise in the price of an alternative good that could be provided then
the curve shifted leftward. If rise in price it leads to fall in quantity demanded. Elasticity refers is
a degree of responsiveness price to goods and goods to price (Griffin, 2016).
The simple demand curve is that price is the only factor which is affects the demand. The
price change in turn increases the rate of production in any market. Demand is the quantity of a
good or services where the customer is willing and able to buy at different prices. When price
increases the seller want sell more products, while the buyers willingness and ability of buyers to
purchase a products will decrease. Similarly when the prices drop down the buyer willingness
and ability to purchase goods increases and seller ability to decreases to sell the products in that
time. So it stated that if price decreases, demand increases and supply decreases. So the
demands exceeds supply. Increase in demand the price will remain constant (Hirsch, 2015).
The article shows that there has been increase in demand of eggs in US which has
maximize per capita income of the nation and as such, consumption is increase as per the
statistics issued by AEB (American Egg Board). The article was published on 29 March 2018
which covers aspect of food services and packed consumer goods. As per AEB statistics, per
capita consumption of egg was 279 in 2017 while it was 275 in 2016 and 256 per person
consumption and so on. This implies that there has been shift in demand curve as eggs consumed
by people is continuously increasing.

Figure 1 Increase in demand Source: raybromley.com
It can be analyzed from the above diagram that there is rightward shift in demand curve
as more eggs are consumed by customers which has caused to such shift. The microeconomic
concept with regards to demand and supply is market equilibrium which shows that when
demand and supply are changed with non-price factors, market will be at new equilibrium and as
such, benefits may be provided to customers and sellers. However, in US, restocking was done
when avian flu outbreak was observed and as such, more birds were affected by flu and which
resulted in increase in prices of eggs. The pricing of goods were hiked and major egg producers
were depressed. Prices were rose in retail sector by 3.8 % in 2016 financial year while it was
reduced to 2 % in 2017 (Watson, 2018). On the other hand, prices again raised to 8.4 % in
January 2018. This means that demand has increased but there is shortage of eggs in the market.
Figure 2 Shortage of goods Source: eqoura.com

In this context, economic concept of shortages is relevant to this article. Demand of eggs
are increased in US as supply has fallen. It is known as shortages when there is excess demand in
the market but quantity supplied is low. This will affect demand of customers as prices will be
increased and as a result, customers will not be willing to purchase the same. This can be
corrected by implementing two ways and attain equilibrium which are increasing prices and
other way is to set price floor above equilibrium level that would cause quantity supplied to
increase, resulting on excess supply, and as such market equilibrium will be attained in effective
manner (Hursh and Roma, 2016).
2. Elasticity measurements and determinants
Elasticity of demand is important concept in relation to economics related to change in
quantity demanded to change in its price. This shows that when Price elasticity of demand is less
than 1, there is inelastic demand. While, elasticity is greater than one, demand is said to be
elastic. Thus, it can be said that there is inelastic demand of eggs in US.
Figure 3 Total Revenue Source: dummies.com
The determinants of elasticity is close substitutes. This means that if more of the
substitute are available, then product would have more elastic demand. The eggs have inelastic
demand as there are no close substitutes and as such, customers will purchase even there are high
prices. This is important concept for suppliers as change in prices would be made and as a result,
effect will be seen on total revenue. This term means that funds received by sellers. It is
computed by multiplying units sold by its price per unit (Iossa and Martimort, 2015). Thus, it

can be analyzed that increase in prices will not affect customer demand as eggs have inelastic
demand. Hence, total revenue would not decline and sellers can earn profits.
CONCLUSION
Hereby it can be concluded that demand and supply are important aspect which leads to
attain market equilibrium. The above analysis shows that price elasticity has great impact on
demand.

REFERENCES
Books and Journals
Baumol, W. J. and Blinder, A. S., 2015. Microeconomics: Principles and policy. Cengage
Learning.
Friedman, L. S., 2017. The microeconomics of public policy analysis. Princeton University Press.
Griffin, R. C., 2016. Water resource economics: The analysis of scarcity, policies, and projects.
MIT Press.
Hirsch, W. Z., 2015. Law and economics: an introductory analysis. Academic press.
Hursh, S.R. and Roma, P.G., 2016. Behavioral economics and the analysis of consumption and
choice. Managerial and Decision Economics. 37(4-5). pp.224-238.
Iossa, E. and Martimort, D., 2015. The simple microeconomics of public‐private
partnerships. Journal of Public Economic Theory. 17(1). pp.4-48.
Online
Watson, 2018 US Per capita egg consumption still rising as protein craze continues, says egg
board [Online] Available Through: <
https://www.foodnavigator-usa.com/Article/2018/03/29/US-per-capita-egg-consumption-
continues-to-rise-as-protein-craze-continues-says-egg-board>