Question

Using demand and supply analysis, discuss the general factors affecting the demand and supply for tuna in Malaysia.
Using demand and supply graphs, explain what would happen to the demand or supply of tuna in Malaysia in each of the cases below stating any assumptions that you would have made based on the statements below.

In March 2011, the tsunami in Japan killed around 15,000 people causing damages and losses in hundreds and billions USD. It was reported that Japan's fishing, aquaculture (tuna and salmon), food processing factories and cold storage areas had been badly affected.

Answer 1

In general, there are some factors that will unanimously affect the demand for tuna:

1. Everyday consumption of tuna in Malaysia (consumption grows, consequently, AD curve will shift to $AD_{2}$);

2. Price of tuna in Malaysia (if the price grows, AD curve will shift to $AD_{2}$);

3. Price of salmon, as a substitute of tuna (if price for salmon grows, AD curve will shift to $AD_{1}$);

4. Per capita income in Malaysia (I assume that tuna is rather widespread product in Malaysia as this South Asian country has developed fishery and therefore tuna is rather affordable for majority of the Malaysians) (if income per capita grows, AD curve will shift to $AD_{1}$);

5. Dreadful tsunami in Japan will cause significantly higher demand for Malaysian fish from Japanese and, therefore, an aggregate demand curve will shift upwards, as there will be more those eager to buy tuna and salmon even at higher price.

At the same time, there are some factors that influence the supply of tuna in Malaysia:

1. Decreasing price of salmon (AS will shift to $AS_{1}$, as there will be more potential profit for producers to earn from tuna);

2. Population of tuna schools near Malaysian coasts; (increasing population will mean higher supply - $AS_{1}$);

3. Expansion of foreign fishing companies (shift to $AS_{2}$);

4. Weather conditions in water area that is used for catch of fish (worsening weather will cause AS curve to shift down to $AS_{2}$).