BY ARINA RAUF

If you had a hand in preparing fish dishes, you might have realised that the price of fish in the weeks leading up to the festive occasion had skyrocketed - popular fishes such as pomfret were going for as high as $100 a kg while other varieties saw prices double! Let’s look at how Economics can be used to explain this yearly phenomenon.

Changes in demand and supply of fish

Eating fish during Chinese New Year has been a tradition over many generations. A quick Google search reveals that serving a ‘whole fish’ reflects the idea of carrying something through from beginning to end and augurs a successful completion of the year. It is also common to prepare a fish meal for the new year dinner for viewing only. This is called ‘looking at the fish’ and is another way of wishing onlookers a prosperous new year - with lots of happiness, good luck, sufficient food and money. 

In terms of Economics, the increase in demand for fish can be attributed to a change in the tastes and preferences of consumers - people tend to buy and stock up on more fish over the festive season as compared to on a usual week as they would be consuming more fish during reunion lunches and dinners.

Another non-price factor of demand that comes into play is an increase in the size of the market. Given that a large population of Chinese celebrate the occasion, suppliers in China have also been snatching up stocks. Hence, there is actually a larger, international consumer base for fish.

Singapore's fish supplies come mainly from Malaysia, Indonesia and Vietnam. However, recent floods in Malaysia have resulted in lower quantities (and quality) of fish being produced. While this is not an explicit non-price factor of supply covered in the A Level syllabus, weather patterns such as floods and droughts do also result in a fall in supply.

Another non-price factor of supply that comes into play is the prices of factor inputs. The ongoing COVID-19 pandemic has slashed labour supply significantly, resulting in an upward pressure on wages. Suppliers are also grappling with higher transport costs and supply chain disruptions. Since these all represent factor inputs in the production of fish, a fall in supply is to be expected. 

In all, we will see a simultaneous rightward shift of the demand curve and leftward shift of the supply curve in the market for fish, which translates to the higher prices of fish which we have experienced firsthand and read about in the news!

Demand-pull, cost-push and imported inflation

Inflation is also known as a sustained increase in the general price level. As seen in the past few weeks, the prices of goods and services have become more expensive - be it fish, prawns or vegetables. This can be explained by the three types of inflation that we have learnt.

Firstly, demand-pull inflation is a result of a rise in aggregate demand when the economy is already operating at full employment level. Hence, we see no increase in real GDP but an increase in the general price level. Again, the COVID-19 pandemic has brought about an unprecedented level of government spending over the past two years, and coupled with the increase in consumer spending as the economy recovers, we see the AD curve shifting rightwards, translating to a rise in the general price level.

Secondly, cost-push inflation is the decrease in the aggregate supply of goods and services stemming from an increase in the cost of production. An increase in the costs of raw materials or labour can contribute to cost-pull inflation. As mentioned previously, Singapore is experiencing such shortages, which translates to a leftward shift of the SRAS curve, leading to an upward pressure on prices.

Lastly, imported inflation simply refers to inflation that is brought about by imports. In Singapore, most goods (such as fish!) are imported from neighboring countries such as Malaysia. As Malaysia also experiences inflation, importing goods from the country would also introduce imported inflation into Singapore’s economy.

In all, we expect the inflation rate in Singapore to rise over the next few quarters due to the above factors. Do keep a lookout on the prices of goods and services the next time you visit the supermarket and you might just realise that Economics really is everywhere in and can be applied to real life!