Thursday, May 5, 2011

Fish Soup

Would you break the law if it were lucrative enough? How lucrative you say?
How about $40 per unit. No its not meth, its something much more dangerous you'd
be smuggling…something that could take a chunk out of you. Recently a fishmonger
weighed the pros and cons of smuggling the illegal snakehead fish in New York. Sadly it
didn't work out for him since he got caught and now must face the consequences. The
economics behind this escapade though are pretty interesting. Mr. Wu (the fish monger)
would sell snakehead soup for close to forty dollars a bowl. The demand for this bizarre
delicacy was obviously very high since he could charge an arm and a leg just for a bowl
of the stuff. Not to mention there was enough demand that he would risk getting some
major consequences for breaking the law if caught. One must deduce then that the reason
price is so high is because the supply doesn’ t meet demand causing a flux in price by
creating a second market. The invisible hand of the market place will always move the
price of an item to equilibrium…even illegal ones. As long as snakehead fish are still
in high demand, the supply will continue to rise-no matter the cost of life or limb. Feel
free to read up here.

-Henri Levy


  1. I'm impressed!!! Anyways I agree the invisible hand always has an important role in economics that is always present. In this case the second market also known as the "Black Market" plays a role of leading the price to reach equilibrium since snakeheads are being illegaly smuggled to try to satisfy only a tiny portion of the high demand. The reason the bowl is a high price per bowl is because the snakeheads are limited due to legal purposes, but as always people figure out tricks to smuggle a product in and sell that product to make a profit.

  2. If we look at our demand graph, the quantity demanded decreases as the price increases. When the price increases the quantity supplied increases because suppliers perceive they will be compensated for their risk of smuggling the illegal cargo. The snakehead fish seems to contradict both of these aspects of basic economics. The quantity supplied of snakehead fish is obviously restricted by its legality, but according to the law of supply, if the price were so high for these snakehead fish more people would try to smuggle and sell the product. And as more people supplied the product, the competition would result in a price decrease, and as price decreases, the quantity demanded would increase. This process would resume until the market reaches an equilibrium price. Forty dollars does not seem to be a reasonable market price for fish, but what do I know, I am not familiar with the illegal fish market. In conclusion, I must disagree. I don’t think that the price for these illegally imported fish will ever reach equilibrium.

  3. Thank you for your comments Abby and Aaron! You raise a good point though Aaron and I offer this rebuttal: the reason supply is still restricted is because the consequence of getting caught is to high for must people.