Economics and the mid-life crisis have much in common: Both dwell on foregone opportunities

C'est la vie; c'est la guerre; c'est la pomme de terre . . . . . . . . . . . . . email: jpalmer at uwo dot ca

. . . . . . . . . . .Richard Posner should be awarded the next Nobel Prize in Economics . . . . . . . . . . . .

Friday, September 16, 2005

The Supply and Demand of Fish:
what happens when gasoline prices increase

There was an outrage in several different fish markets in the United Arab Emirates recently because of the skyrocketing price of fish. But the Emirates Economist has a clear and logical explanation:

Basic economics. Petrol fuels fishing boats, so the increase in petrol prices pushed up the cost of fishing. The result is a decrease in the supply of fish. If the price of fish were to remain unchanged the quantity demanded would exceed quantity supplied. The price of fish gets bid up, encouraging production and discouraging consumption. Price eventually settles at a new higher equilibrium price.

Fish traders aren't any greedier than the rest of us. Fish prices may have taken a jump up that is out of the ordinary, but that price increase can be explained by the increase in the price of petrol. If there was a "mechanism" - government regulation - to control prices the results would far more unpleasant. Many consumers would not find fish available. Further, fish traders could let the freshness of fish slip and still find willing buyers - if you're concerned about freshness now, don't wish for price controls.
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