Foot+and+mouth+outbreak+sends+pork+prices+soaring++Shinyoung


 * __Foot-and-mouth outbreak sends pork prices soaring__**

Source of Extract : http://www.koreatimes.co.kr/www/news/biz/2011/01/123_79936.html Date of Extract 01-19-2011

Summary

In Korea, due to the Foot-and-mouth outbreak, there has been a mass cremation of pigs that have been contacted with the disease. And 1.96 million pigs have been slaughtered since the outbreak, which is a one-fifth of total pig population in Korea. This had a great impact on decreasing the amount of pork supplied in Korea. Consequently, the supply curve of pork has shifted to the left. Yet, demand for pork has unchanged and is even being expected to rise because of the upcoming Lunar New Year Holiday. Thus in order to meet the new equilibrium point, the price of pork has increased substantially and the quantity supplied had decreased. The government is going to re-open slaughter house that were previously closed in order to increase pork supplied. They are hoping that the pork prices would stabilize before the New Year Holiday.

Terms Supply:Willingness and ability of producers to produce quantity of a good or service at a given price in a given time period Demand: Quantity of good or service that consumers are willing and able to purchase at a given price in a given time period Subsidies: payment made by the government to firms that will, in effect, reduce their costs. Buffer Stock Scheme : the situation where a government intervenes in a market to stabilize prices by buying up surplus commodities and releasing them during shortage.

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Evaluation

In order to settle the prices of the pork before the Lunar New Year Holiday, the government is trying to increase the supply by re-opening some of the slaughterhouses that were previously shut down. However, this is not the best way to deal with this problem. By opening the slaughterhouse, not only there would be little effect on increase in supply, but also it is an action risking the health of the people. The previously shut down slaughterhouse was shut down because of safety reasons. And re-opening just because to increase supply does not make sense. Thus, the government should take alternative policies in order to settle the prices into reasonable amount. One of the way to settle the pork price is by shifting the supply curve to the right. One common way to shift the supply curve is through the Buffer Stock Scheme. Yet, the government currently has no pork stored up. An alternative solution is to import meat from other countries. Currently the only limited amount of pork can be imported into Korea. By increasing the limit, there would be more supply of pork in the market and the supply curve for pork would shift to the right. Another possible solution is to provide subsidies to farmers. By providing subsidies the prices for pork would decrease. Yet, a problem with this solution is that the supply curve wouldn't shift right because the farmers cannot increase the supply of pork in such a short notice, and the disease of pigs cannot be controlled as the farmers want to.