Will High Pork Prices Ruin the Holidays?

The supply and demand model is the core of microeconomics. You can never have too many examples in your classroom. Here is a simple example that will help students distinguish between shifts in demand and shifts in supply. As a bonus, the case also illustrates import restrictions, if you want to use it in conjunction with your international trade lectures. The attached PowerPoint slides can either be used as part of a classroom discussion, or printed out (with the answers deleted), and used as a quick quiz.

Pork is a popular dish in Malaysia among those who celebrate the Chinese New Year holidays. (About a quarter of Malaysia’s 28 million people are of Chinese descent.) This year, though, consumers are grumbling at high pork prices, which have reached 7.65 Malaysian ringgits per kilo at the wholesale level (about $1 per pound) . They are blaming anyone they can think of—pork producers, the government, whoever.

What is behind the high prices? Beh Kim Hee, chief of the pork section of the Federation of Livestock Farmers Associations of Malaysia, says it's normal supply and demand. Demand is up because of the holidays. At the same time, the need to upgrade production facilities to meet sanitary standards is raising the cost of production.

Those who blame the government seem to be on to something, as well. The government bans the import of fresh pork from neighboring countries like Vietnam, China, and Thailand, where it is a third or more cheaper. National Pork Sellers Association president Goh Chui Lai has urged the government to end the ban. Not surprisingly, Mr. Beh, the pig farmers’ representative, objects to removal of the ban.

To download your free PowerPoint slides for this item, click here. Source: Based on information from Meat Trade News Daily, December 31, 2009, supplemented by other sources. To view the original news item, follow this link.