Impact of Lobster Harvest, US Economy, and Fishermen’s Costs on Lobster Supply and Price

Unusually Low or Large Lobster Harvest and Its Effect on Supply

How Would An Unusually Low (Or An Unusually Large) Lobster Harvest  Affect The  Supply Of Lobsters In Main And How Would This Shift In Supply Impact On The Price Of Lobsters?

How Would a Weak (Or a Strong) Us Economy Affect The Demand For Lobsters And How Would This Impact On The Price Of  Lobsters?

How Would Increases In Fishermen’s Bait And Fuel Costs Affect The Supply Of Lobsters And, Consequently, The Price Of Lobsters. 

When there is unusually low supply, supply goes down and supply curve shifts leftward from S to S1 by keeping same demand D leading to supply shock which pushes up equilibrium price from P* to Pa and lowers quantity from Q* to Qa, as shown in Figure:1 (Edwards 2017). The opposite thing happens with an unusually large lobster harvest. Supply increases and shifts rightward as shown in Figure: 2. This leads to a fall in equilibrium price from P*($4 per pound) to Pa($3.89 per pound)  and raises the quantity from Q* to Qa due to excess of supply, leading to a supply shock. Thus, sellers of Lobster has to sell more lobsters at low prices. Moreover, global financial crisis affected the export market of marine lobsters as Icelandic banks failed to maintain the seafood industry.  

A weak economy is a situation where economic growth is decreasing or slow due to factors like the rise in unemployment rate, fall in per capita income and consumption (Mankiw 2016). This leads to demand shock, which lowers the aggregate demand (AD) for good. Lobster being an elastic good is widely affected by the supply shock as lobster consumption went down. Lobster is considered as a celebratory item and in weak economic condition people dined less which affected the lobster market. A fall in AD lowers output demanded from Y1 to Y2 level with a fall in price from P1 to P2, as shown in Figure:3.  

A strong economy means a good economic performance which leads to a positive demand shock where the aggregate demand goes up, causing a rise in price and output of lobster. However, weak Us economy has hit prices to the lowest level.   

If the cost of fisherman’s bait and fuel goes up, the production cost will go up. In order to balance the large lobster harvest and balance the production costs, fishermen charges a high price of lobsters and increase its harvest from AS1 to AS2 (Varian 2014). Under weak economy, banks are unable to finance the lobster market to export lobster and gather huge revenues. Higher lobster price lowers the aggregate demand from AD1 to AD2, that supplies the output that a low price level.  Moreover, a fall in aggregate demand for lobster has already has a negative impact on the lobster market causing a rise in output from Y1 to Y2 and lowering the price level from P1 to P2. Thus, supply and demand shock occurs that slows the lobster market and affects the fishermen. 

References 

Edwards, W.A., 2017. Principles of Microeconomics. Mankiw, N.G., 2016. Principles of economics. Cengage Learning. Varian, H.R., 2014. Intermediate microeconomics with calculus: a modern approach. WW Norton & Company.