Economics HL High Quality Commentary

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 By Angad Chaturvedi and Wilson Wong

Commentary Number 4 Extract

Article: Shellfish suffer in hurricane’s wake

Author: Joyce Howard Price

Source: The Washington Times

Article Dated: September 16, 2005

Date: October 25, 2007

This article talks about how the Shellfish industry in Louisiana and Mississippi was affected by Hurricane Katrina. The article discusses how most of the of the oysters and shellfish in the affected area did not survive, the companies in those areas lost most of their assets and the majority of the infrastructure in the areas affected was destroyed.

This can be related to the economic theory we have learnt about Demand and Supply Curves, factors of production, economic growth and development and stakeholders.

Demand and Supply Curves

 

The above diagram displays how we can relate the economic theory we have learnt about Demand and Supply Curves to the subject of this article. Because there is a decrease in several factors of production, i.e. natural resources (Oysters and Shellfish), labour (Workers would have moved to other areas of the country and so less labour will be available for the same price) and capital (the article states that “extensive damage occurred to the whole seafood industry’s infrastructure, including harvesting vessels, docks and processing facilities”), there will be a shift in the supply curve towards the left (on the diagram, from the ‘Original Supply Curve’ to the ‘New Supply Curve’). Another result of these changes will be that demand will contract. As a result, the equilibrium price will shift up and along the demand curve (on the diagram, from ‘x’ to ‘y’).

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The price may also rise further as there will now be an increase in the relative scarcity of shellfish. As the hurricane may have lead to unemployment in the areas affected, there may also be a further drop in demand for shellfish. Because of the damage to infrastructure, there will be an increase in the cost of production therefore, a further increase in price.

All of these factors and the production possibility curve indicate that the shellfish industry is going to incur severe losses as a result of this hurricane.

Factors of Production

Economic theory we have learnt ...

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