F.4 Economics: News Analysis
F.4B Winnie Hung (10) Doris Ko (11)
Shops to sell mainland chilled beef
Martin Wong and Ng Yuk-hang
Dec 07, 2010 SCMP
Shoppers will soon have another choice in buying beef after an agreement was reached
yesterday to import chilled beef from the mainland.
The chilled beef, less expensive than the fresh product will be imported from a large
supplier and the health minister said more suppliers would be introduced if there was
high demand.
Secretary for Food and Health Dr York Chow Yat-ngok said there was no limit on the
quantity of imported beef. "Hong Kong merchants can deal directly with the biggest
chilled beef supplier on the mainland. As long as Hong Kong merchants are interested,
chilled beef can be imported in the near future," he said.
It is estimated that it will be cheaper by about 30 percent based on the price of chilled
mainland beef across the border. But the head of the main traders' association yesterday
predicted the chilled meat will be 10 to 20 percent cheaper than fresh beef in the retail
market.
Chilled beef from the mainland would be about HK$40 a catty. However, due to the
serious inflation, the retail price of fresh beef is about HK$60 per catty, which has
increased by 40% since last year. Kwok Shi-hing, chairman of the Hong Kong Chilled Meat
and Poultry Association, said that the import of chilled beef will benefit the public.
He said it was difficult to predict the demand for chilled beef, because that currently on
sale in the city was from such places as Canada and Australia, and could be more
expensive than fresh beef.
Catering Industry Association vice-president Thomas Woo Chu believed many families
and restaurants would switch to chilled beef.
"The prices are more affordable and the difference in taste is small, given the advanced
technology," he said that he had kept a close eye on such products for a long time.
New Analysis
Description of the News
Mainland and Hong Kong has reached an agreement on the issue about the import
of Mainland chilled beef to Hong Kong next month. It is estimated that the price of
Mainland chilled beef will be 10% to 20% cheaper than fresh beef which costs about
HK$60/catty. Restaurants, importers and wholesalers welcome the newly established
import arrangement.
Explaining the issue
1.
Mainland chilled beef imported to Hong Kong and fresh beef on sale in Hong Kong
are goods that can be replaced by each other to satisfy the same want. They are
substitutes which are in competitive demand.
As mentioned in the news, price of fresh beef in Hong Kong rises.
According to the law of demand, as price increases, quantity demanded decreases,
vice versa, ceteris paribus.
It will cause a decrease in quantity demanded for fresh beef.
As the price of fresh beef increases, it will cause an increase in demand for chilled
beef imported from Mainland.
2.
As price of chilled beef is 10-20% cheaper than fresh beef, many families and
restaurants would switch to chilled beef. It will lead to a rise in demand for chilled
beef. Besides, as mentioned in the news, Hong Kong merchants can deal directly
with the biggest chilled beef supplier on the mainland. Therefore, there will be an
increase in supply of chilled beef.
There are 3 possible results for rise in both demand and supply.
(a) Rise in demand > Rise in supply
If rise in demand for chilled beef is larger than that of rise in supply,
equilibrium price rises and equilibrium quantity rises.
(b) Rise in demand = Rise in supply
If rise in demand for chilled beef is equal to rise in supply,
equilibrium price is unchanged whereas equilibrium quantity rises.
(c) Rise in demand < Rise in supply
If rise in demand for chilled beef is less than supply,
equilibrium price falls and equilibrium quantity rises.