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 about the Factors of Production is also relevant to the subject of this article. There will be a drop in availability of 3 of the factors of production (Land, Labour & Capital) and so there is going to be a significant increase in relative scarcity.
Land will become scarce because the natural resources required for the shellfish industry (oysters and other shellfish) have become scarce, and shellfish companies which were located in that area may have had their premises and the area around them damaged and so there will be a drop in the value of their land.
Labour will become scarce because companies will no longer be able to pay for expensive labour due to the losses they are already incurring and secondly large amounts of workers and fishermen may have moved to other parts of the country due to the hurricane destroying the general infrastructure of the areas affected.
Capital will become scarce as the capital (machinery, boats, factories) of several companies in the shellfish industry may have been completely destroyed as a result of the hurricane.
Economic Growth & Development
Taking economic theory of economic growth and development into account, this article indicates that Hurricane Katrina is going to severely effect the economic growth and development of the USA. Because there are no more oysters or shellfish in the affected area, most fishermen and employees of companies in the shellfish industry may lose their jobs, this will cause a decrease in the real national income per capita and therefore a decrease in real GDP. The unemployment will lead to less demand for oysters and shellfish and therefore it will then lead to further unemployment as a result of the demand multiplier effect.
Relief efforts will also put a strain on tax payers as taxes may increase and therefore the national income per capita and real GDP will fall further.
Another effect on the economic growth will be that the oyster firms affected by the hurricane will be less productive and competitive because of rising costs and increasing scarcity of the factors of production, therefore there will be a decrease in exports and if exports fall below imports in quantity and value, there will be a negative balance of payment and the national economy will suffer.
Economic theory we have learnt helps us analyse these issues and from this we can conclude that as a result of all of these issues, the real GDP will fall and so the level of Economic Growth will fall.
Stakeholders
Using the economic theory learnt, and the above analysis of the economic issues described in this article, we can know state how stakeholders in the shellfish industry will be effected and how they will react.
Owners/Shareholders –will be unsatisfied as they will lose the money they have invested in firms that operated in the shellfish industry and so they are likely to react by not investing any more money in the industry and selling any remaining shares in those companies which will mean the economy suffers further.
Managers – will be effected severely as the responsibility of keeping the business operating and making a profit will become even more difficult and so they will want to make sure the business survives and invest all possible capital and profits into the business so as to make sure it can keep operating while at the same time making sure shareholders are satisfied.
Employees – will be at risk of being made redundant due to firms incurring heavy losses as a result of shellfish being wiped out in that area. They are likely to react my diverging into other areas of employment or moving to other parts of the country which weren’t affected by the hurricane.
Consumers – as supply of shellfish and oysters will decrease, consumers will face difficulty finding oysters and the prices will also rise so consumers may not want to pay more for shellfish and oysters and so may resort to substitute goods or look towards cheaper foreign imports.
The Government – will face a crisis as rising unemployment will cause problems for the economy and raising taxes won’t raise enough money, government expenditure will increase. The government may also have provide aid to fishermen and other workers made redundant from the shellfish industry. The government will also have to work harder and spend more money in order to clean up any pollution caused to the ocean as a result of the hurricane and if undamaged oysters and shellfish are found, they will have to carefully control harvesting of such creatures so as to not wipe out those species from the affected areas of the ocean.
Environmental Groups – will have to increase expenditure as they will want to provide aid to animals and people affected by the hurricane. Should a small amount of oysters and other shellfish be found undamaged, they will probably campaign to make sure firms don’t exploit these small amounts so as to wipe them all out.