Explain how rising pork prices could affect consumer expenditure on feather shuttlecocks and its related goods, such as rackets.
(b) Explain how rising pork prices could affect consumer expenditure on feather shuttlecocks and its related goods, such as rackets. [15]
RVHS 2024
Consumer expenditure on a good is calculated as the price of the good multiplied by the quantity purchased. Any change in the price or quantity will therefore affect total expenditure. To understand the effect of rising pork prices on feather shuttlecocks, it is necessary to examine the supply-side changes in the market for ducks and geese, which provide the feathers used in shuttlecock production.
Impact of rising pork prices on feature shuttle cocks
An increase in pork prices will cause farmers to shift their resources toward raising pigs instead of ducks and geese, as these are in competitive supply. Competitive supply refers to a situation where two or more goods require the same resources for production, such that an increase in the production of one good reduces the resources available for the production of the other. In this case, the resources (such as land, feed, and labor) required to raise ducks and geese are now diverted to raising pigs, which are more profitable due to the higher pork prices.
As farmers respond to higher pork prices by raising more pigs, the supply of ducks and geese will decrease. This can be represented by a leftward shift in the supply curve for ducks and geese from SS₀ to SS₁. At the initial price P₀, there will be a shortage of ducks and geese, as quantity demanded (Qd) exceeds quantity supplied (Qs), creating upward pressure on the price of ducks and geese. This price increase from P₀ to P₁ means ducks and geese will become more expensive.
Since feather shuttlecocks are produced using feathers from ducks and geese, the higher cost of raising these birds translates into higher factor input costs for shuttlecock manufacturers. As a result, the supply of feather shuttlecocks will decrease, shifting the supply curve leftward from SS₀ to SS₁. This reduction in supply causes the price of feather shuttlecocks to rise from P₀ to Pi.
Given that feather shuttlecocks are generally inexpensive and occupy a small proportion of consumers’ income, it is likely that their demand is price inelastic. Price inelastic demand means that a percentage increase in price will lead to a smaller percentage decrease in quantity demanded. Therefore, while the quantity demanded decreases from Q₀ to Q₁, the reduction is relatively small compared to the price increase. This results in an increase in total consumer expenditure on feather shuttlecocks, from 0P₀AQ₀ to 0PiBQ₁, as the higher price more than offsets the reduction in quantity demanded.
Impact on rackets
Feather shuttlecocks and rackets are complementary goods, meaning they are often used together in activities like badminton. When the price of one complement increases, it tends to reduce the demand for the other. In this case, the rise in the price of feather shuttlecocks will lead to a decrease in the demand for rackets.
With higher shuttlecock prices, consumers may reduce their overall badminton activities, leading to a fall in the demand for rackets. This shift can be represented by a leftward shift in the demand curve for rackets from DD₀ to DD₁. At the initial price P₀, there will be a surplus of rackets, as the quantity supplied (Qs) exceeds the new quantity demanded (Qd). This surplus will exert downward pressure on the price of rackets, causing it to fall from P₀ to P₁.
The fall in both the price and quantity demanded of rackets will lead to a decrease in total consumer expenditure on rackets, from 0P₀AQ₀ to 0P₁BQ₁.
Conclusion
In conclusion, the increase in pork prices has created a ripple effect through the market for ducks and geese, ultimately increasing the price of feather shuttlecocks due to higher input costs. Despite the price increase, total consumer expenditure on feather shuttlecocks is expected to rise because of the price inelastic demand. Meanwhile, the rise in shuttlecock prices will negatively affect the demand for complementary goods, such as rackets, leading to a decrease in both the price and quantity of rackets, as well as total consumer expenditure on rackets.
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