Humans who consume beef products made from diseased animal parts can develop mad cow disease (bovine spongiform

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Humans who consume beef products made from diseased animal parts can develop mad cow disease (bovine spongiform encephalopathy, or BSE, a new variant of Creutzfeldt- Jakob disease), a deadly affliction that slowly eats holes in sufferers’ brains. The first U. S. case, in a cow imported from Canada, was reported in December 2003. As soon as the United States revealed the discovery of the single mad cow, more than 40 countries slapped an embargo on U. S. beef, causing beef supply curves to shift to the left in those importing countries. At least initially, a few U. S. consumers stopped eating beef, causing the demand curve in the United States to shift slightly to the left. (Schlenker and Villas- Boas, 2009, found that U. S. consumers regained confidence and resumed their earlier levels of beef buying within three months.) In the first few weeks after the U. S. ban, the quantity of beef sold in Japan fell substantially, and the price rose. In contrast, in January 2004, three weeks after the first discovery, the U. S. price fell by about 15% and the quantity sold increased by 43% over the last week in October 2003. Use supply- and- demand diagrams to explain these events.

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Managerial Economics and Strategy

ISBN: 978-0321566447

1st edition

Authors: Jeffrey M. Perloff, James A. Brander

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