Lamb+prices+surge+as+supply+drops,+demand+rises

Source: http://www.usatoday.com/money/industries/food/2011-04-22-lamb-prices-demand.htm

Summary: The demand for lamb has risen in the US, while supply for lamb decreases, prices for lamb to soar. Many restaurant owners are facing lamb shortages. Last year’s May delivery of lamb fetched about $1.39 a pound; this year the price is around $2.20 a pound. This sudden increase of price is due to a lack of supply because of the decreased imports of lamb from other countries to the US. The increased demand comes as supply drops, in part due to decreased production in Australia and New Zealand, two of the world leaders in production and large exporters to the U.S. Australia used to produce over 170 million lambs a year two years ago, now they only produce 70 million, mainly because of the drought. Drought also has hurt some states like Texas. According to the article, both domestic and overseas producers have decreased supplies for lamb, combined with the high demand for it, prices soar in the US. Definition: Supply: The entire relationship between the quantity supplied of a good or service and its price. Demand: The entire relationship between the quantity demanded of a good or service and its price. Scarcity: the limited availability of any good. Factors of production: factors of production (or productive inputs or resources) are any commodities or services used to produce goods and services. Evaluation: As an economist, I think there are two solutions to this problem. One way is to increase the overall supply of lamb, which would cause prices to decrease since lamb would no longer be as scarce. The second solution is that people find a substitute for lamb like mutton or older sheep so that there would not be as much of a strain on the lamb industry and therefore allow it to have time to rebuild and strengthen. To increase the supply of lamb, one must explore the factor of production for that industry. The number of firms could be increased so that more lamb can be produced, better management and labor could also help. On the other hand many of the exporting countries for lamb are suffering from drought, like Australia, so the second solution would be a better choice since draught cant be easily fixed by tampering with the factors of production. By substituting lamb and decreasing the strain on the industry, it could give these countries the time they need to regain its footing-one step back, two steps forward.