Part of the syllabus: Microeconomics Article
Source: Krugersdorp News
Date of the article: 2016-12-22
Link to article: Meat prices expected to increase up to 15 per cent
The festive season is here. The article argues it affects the demand for red meat. Recent droughts have increased red meat slaughtering which lead to growing supply. How could these changes in demand and supply lead to possible increases in meat prices? Surely a “meaty” article for your IA!
Talking points for your Microeconomics Internal Assessment:
- For your information – Krugersdorp is a suburban area in South Africa near Johannesburg. This might be important for better understanding the microeconomics article. You might even want to mention this for your examiner in the beginning of your Internal Assessment.
- The article talks about changes in demand and supply. Remember the determinants of supply and demand – what shifts these curves? Draw a diagram, shift the curves, explain why they shift and what kind of effect does it have on the price and equilibrium quantity of red meat. (Note: see that the foreign demand is also growing). You could also insert a short quotation or two here.
- To evaluate – see how that price increase might affect other markets. The article mentions pork and poultry. Discuss how close of a substitute each of these are to red meat… Does having a close substitute change the price elasticity of demand? If you mention PED – you could define it as the responsiveness of the quantity of a good demanded to a change in its price (definition is a must!). To expand this point you might even draw a diagram of one of the markets and show the effects by shifting curves.
- Another evaluation point – could consumers be less willing to substitute during the festive season? Lower PED for meat during Christmas? The microeconomics article mentions “pressure on disposable income” and “tough economic conditions”. See the quotation in the article it might lead you in the right direction. (If you are going to talk about this – defining disposable income is compulsory. This shows the examiner you know what you’re talking about as well as allows him to give you a point for defining and using relevant economic terms.)
- You might discuss how and why prices would return back to “normal levels” in January. Or maybe talk about the future of the market which is mentioned at the very end of the microeconomics article. Paul concluded that the upcoming rain will lower grain prices and in turn decrease animal feed costs. How will that affect the meat market in the future? You could mention grain being a “production input” for red meat and if input prices fall, output prices “should” fall as well.