Lobster, a seafood delicacy which is usually only eaten on special occasions, has seen its price slashed by over 50%. This is great news for American families who can have a luxury dinner at bargain prices.
It is not great news however for lobster farmers. They are having to deal with a huge surplus of lobsters as demand from China has plummeted in the last month following the outbreak of the deadly coronavirus.
The demand-side shock came at a terrible time for American lobster farmers as they usually ramp up production just before Chinese New Year. Lobster is extremely popular in China, with demand so high during the Lunar festival that huge quantities get sent over on chartered flights.
With the outbreak of the coronavirus in January, the Chinese hospitality industry has come to an almost complete standstill, leading to no need for those planes full of lobster.
Instead, the American market has been flooded with the luxury seafood, driving down prices from $40 per pound at one California fish market to just $19.99. Consumers in the US should take full advantage of the low price and enjoy some big lobster dinners as who knows how long the prices will stay so low.
THINK LIKE AN ECONOMIST!
Q1. What is meant by the term excess supply?
Q2. Draw a diagram to show the impact of the coronavirus on the equilibrium price for lobster in the US.
Q3. Assess the impact of the coronavirus in China on American consumers.
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