Consider Country A that produces a large amount of chicken, keeping part of them for local consumption and exporting the surplus amount of chicken to other countries. Due to increasing price of chicken which adds to the higher living costs in Country A, there are increasing requests from the residents of Country A to make chicken more affordable.

(a) In Country A, chicken is the cheapest white meat consumed by almost every household. It is also the main source of protein with very few close substitutes. Rearing chicken also needs time and a substantial amount of land. Based on this information and your understanding of the determinants of the price elasticities of demand for and supply of chicken, classify chicken in terms of the price elasticity of demand and supply. Explain your answers. (10 marks)

(b) The government of Country A has decided to ban the export of chicken to other countries to help the consumers of Country A. Appraise the efficiency of the chicken market with the export ban. Explain how the ban of export of chicken will affect the welfare of consumers, producers and the society as a whole in Country A. Support your answers with a diagram of chicken market in Country A. Your diagram needs to reflect the correct price elasticity of demand and supply. (55 marks)

(c) To provide further help to consumers of Country A, on top of the export ban, the government has decided to implement a price ceiling of chicken in Country A. Examine the chicken market and analyse the welfare effects of the price ceiling in the chicken market in Country A. Support your answer with a suitable chicken market diagram. Explain whether the chicken consumers in Country A better off with this price ceiling. Your diagram needs to reflect the correct price elasticity of demand and supply. (35 marks)

Answer rating: 100% (QA)

a Chicken in Country A can be classified as having relatively inelastic demand and supply Price Elasticity of Demand PED Chicken is the cheapest white ... View the full answer