Supply and Demand

Assuming the supply curve for beef is fixed, the unfavorable climatic conditions caused by drought will cause a leftward shift in the demand curve for beef due to a decrease in supply.  In short-run, the demand for beef will exceed the supply across the states causing the customers to shift to substitute which is pork.  In this case, the demand for pork varies directly to demand beef, and thus the law of demand and supply will come into place to influence the equilibrium of the two commodities. Assuming the prices of the two products doesn’t change, unfavorable climatic conditions for beef will cause disequilibrium in the beef market as the consumers will demand more than what the suppliers are willing and able to supply (Bernanke, & Frank, 2009). On the other hand, the pork market will operate at equilibrium as customers will shift to pork products due to an increase in supply.

In regards to the efficient market hypothesis, the concept can be used in describing two types of markets depicted by weak-form and strong-form efficiency.  In my thinking, the weak efficiency, the consumers will lack adequate information about products as well as profit maximisers lacking approaches to forecast market value and individual securities. On the other hand, strong efficiency leads to competitiveness among rational consumers and investors thus providing crucial information for pricing commodities and securities.   In my opinion, market efficiency can be achieved through government policies such as introducing price ceiling in the measure of the intrinsic value of the commodities and securities (Gregory & Ruffin, 2012). In my reasoning, the inefficiency in the markets causes price distortions and disequilibrium in the securities and commodity market. Therefore, to achieve market efficiency, the consumers and profit maximizers need to be provided with crucial information to adjust to market dynamics.

 

 

References

Bernanke, B., & Frank, R. (2009). Principles of economics. Europäische Ausgabe, London.

Gregory, N., & Ruffin, R. J. (2012). Principles of macroeconomics. THOMSON PRESS (INDIA) Limited.