Name: Dain Woo

IB Economics
Commentary Planning Sheet
Unit in Kognity 1.1.4
(Name/Number) 1.1.6
Supply
Market Equilibrium
Title of Article: Meat was once in short supply amid pandemic. Now, It’s on Sale.
Source: The Wall Street Journal
Date of article: September 20th, 2020
Date of access October 21th, 2020
to website or
source

The overall aim is to use your economics knowledge to explain an event or issue in the world
around us.

Which economic theory is relevant to the discussion of the article?

The law of supply
Market equilibrium
Excess supply
surplus

Important terms in the article or related to 1. demand: the consumer’s desire to

the article that would require definition:
purchase goods and services and
willingness to pay a price for a specific
good or service.
2. (excess) supply: The situation where
the price is above its equilibrium price.
The quantity willing supplied by the
producers is higher than the quantity
demanded by the consumers. This induces
the suppliers to lower their price to make
their product more appealing to the
consumers.
3. shortage: The situation in which
demand for a product or service exceeds
the available supply. This is also known as
disequilibrium.
4. production: An activity carried out
under the control and responsibility of an
organizer that uses inputs of land, labor,
capital and enterprise to produce outputs
of goods or services.

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5. export-reliant products: (trade-

dependent) goods and services that rely
mainly on export to foreign countries.
What issue is discussed in the article?
The article discusses about the effect of the covid-19 outbreak to the meat industry in the
US by time, specifically to the extreme downfall of their prices, by comparing the supply
and demand of meat in the first quarter of 2020 and the current quarter.
The author is saying that the meat prices are falling in general in the US market as last
spring’s shortages fade and livestock clog farms, benefiting consumers but hurting meat
producers and farmers, who are already hit by covid-19 disruptions.
The author explains how the excess supply of livestock led to producers lowering price
through discounts and promotions in order to bring a surge in consumer demand.
The author has mentioned that meat-plant shutdowns, which hurt production in the
spring, have led to the excess supply of livestock now. As meat producers kept livestock in
stock for too long, there are too much stocks kept now, and the current level of meat
supply cannot be followed by US slaughterhouses.
The author also explains how the export of meat in the US slowed down due to the covid-
19 restrictions, meaning that more supply will need to be cleared out through domestic
consumption.

What diagram(s) could you draw and explain to illustrate this issue? Sketch them.
Diagram to illustrate a problem Diagram to show the suggested policy
solution
Price S1 S2
Excess supply

Eq2
P
Eq1
P1

Qd Q1 Qs output

Now, evaluate this issue. If there is a policy solution, is it likely to solve the problem?
What are the likely effects, both positive and negative, in the short and the long run, on
various stakeholders? If you can, rank the impacts from biggest to least, with reasons.
Lastly, for the best sort of evaluation, how does this instance reflect on economic theory
itself? Does what happened or what is suggested in your news article accord with what
economic theory suggests should happen? If not, why not?

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The result of the surplus of meat is a significant decrease in the market price.
The solution to clear out surplus would be to reduce prices even more to sell off excess
supply. This is because lower prices discourage supply and encourage demand until the
excess is sold out.

- pros and cons

- pros:
consumers can purchase meat with a much lower price with higher quality, and
possibly with a wider variety of choices as well. There would be positive
externalities caused by this, as more people are able to purchase meat, meaning
that they are able to consume more healthy food, lowering health risks, increasing
their productivity in work, therefore bringing an increase in the efficiency of firms.

Producers can clear off their stocks, meaning that they would be able to heighten
their price again later, leading to increased revenue.

- Assumptions
The law of supply: price and quantity supplied of a good are directly to each other,
ceteris paribus.
Therefore, if the price is lower, consumer expenditure will increase.

- Stakeholders
Consumers
Meat producers (livestock producers, slaughterhouses)
Retailers

- short run/long run

Short run: stock can be cleared out faster

- priorities
producers: clearing out meat stocks and recovering market price as soon as
possible to increase revenue

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