Between 1980 and 2005, the amount of shrimp consumed by Americans nearly tripled, from 1.4 pounds per person to 4.1 pounds per person. Without Googling the topic or even giving it that much thought, what answers might you give to explain the trebling of shrimp consumption in America? Once you've thought of one or two explanations, scroll down.
Truth be told, there is no hard and ready answer (see the end of the post)--the point was to test a hypothesis I'd read about a few months ago.
There's a professor at MIT who thinks that non-economists (or simply those who learned little to no economics) will tend give explanations that focus on changes in demand, such as changes in preferences or information etc., like:
- People are becoming more health conscious and shrimp are healthier than red meat
- Red Lobster switched ad agencies, and their ads are now working
Whereas economists (or simply those who have learned basic economics pretty well) will tend to give answers that focus on changes in supply, like:
- People have designed better nets for catching shrimp
- Weather conditions in the Gulf have been favorable for shrimp eggs
So which type of answer did you give?
I can't remember if I gave a demand- or supply-oriented answer when I first read the example, but my intuition is that the hypothesis is correct. Most people (being consumers) can easily relate to forces affecting demand, but those forces that might affect someone's willingness and ability to supply a good or service is perhaps not so readily accessible. Like many things in economics, the definition of "supply" is easy to memorize but difficult to internalize.
I've implicitly used supply-side analysis a few times before (once quite recently), and I intend this post as a preface to one I will make tomorrow rehashing some ideas from two older posts.
Oh, and shrimp consumption trebled because real shrimp prices fell by 50 percent in the past 20 years, which in turn was probably caused by improvements in shrimp farming--a supply-side effect, sure enough.