Read the scenario describing the recent outbreak of \"bird flu\" in the U.S. The
ID: 1212369 • Letter: R
Question
Read the scenario describing the recent outbreak of "bird flu" in the U.S. Then use your knowlege of the factors influencing demand and supply (and materials from Chapters 3 and 4 macroeconomics for today 8th edition ) to explain what the potential market impacts are from the perspective of both the producer and consumer
The U.S. poultry industry has been in the news recently due to an outbreak of a highly pathogenic strain (H5N2) of the “bird flu.” First identified in backyard poultry flocks in the Pacific Northwest in December 2014, concerns are mounting as confirmed cases of the H5N2 bird flu have been reported in the mid-west. Thus far, confirmed cases of H5N2 have been reported in commercial turkey flocks Minnesota, Missouri, Arkansas, Iowa and Ontario, Canada. Because the virus is highly pathogenic (or contagious) and there is no vaccine, the only recourse producers have is to destroy the infected birds and depopulate the facility. As a result of the H5N2 outbreak, 3.1 million head of turkeys have been depopulated (or destroyed). Perhaps the H5N2 confirmed case generating the most attention is the recent (April 20) on a commercial chicken farm in Northwestern Iowa. That egg-laying facility housed 3.8 million hens, all of which will be depopulated. Earlier this year, the virus was found in Nebraska which prompted the depopulating of the affected egg-laying facilities and the cancellation of all poultry gathering events (such as county fairs and farmer's market) to prevent further spread of the virus.
Health officials stress the risk to humans is low (there have been no human cases of bird flu reported in the U.S.) and there is no risk to the food supply. Currently, the only confirmed cases have been in turkeys and egg-laying hens - there have been no instances of H5N2 in the commercial broiler flock which produces chicken meat. However, international buyers have reacted to the news by banning poultry imports from infected states/provinces.
What are the potential market impacts of the H5N2 outbreak described above?
In a brief paragraph, explain the potential market impacts from the consumer perspective (e.g., demand). Your explanation should be specific, identify the relevant non-price determinants of demand (demand shifters) and reflect an understanding of the factors influencing demand.
In a brief paragraph, explain the potential market impacts from the producer perspective (e.g., supply). Your explanation should be specific, identify the relevant non-price determinants of supply (supply shifters) and reflect an understanding of the factors influencing supply.
Explanation / Answer
H5N2 virus was considered highly contagious and there was no vaccine available in the market so there was a lot of fear among the consumer, which affected the 'preference' component amongst the demand determinants. There are five determinants to demand:
The market for suppliers was also affected. The determinants of supply are:
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