Internal Assessment

Posted: August 25th, 2021

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Internal Assessment

The article is a precis of an ongoing economic crisis which is being experienced across France. In particular, there has been a recorded shortage of butter in the market for a considerable period. This product is now a basic nutritional commodity in the diet of most French citizens. For example, it is used in the making of croissants, a popular breakfast snack. In recent, many Paris bakers have found themselves on crossroads where they have been compelled to use margarine in place of butter due to an acute shortage. This shortage of butter crisis that is currently being felt in the French baking industry is a macroeconomic problem which can be modeled and explained from an economic demand and supply outlook.

To start with, the laws of demand and supply explain the dynamics that are experienced in any industry which deals with consumer products. The law of demand posits that as the prices surge, the demand of a commodity decreases. People avoid consuming when a product’s affordability shifts upwards. The law of supply, on the other hand, states that when prices increase, the quantity supplied increases as well. Suppliers are more willing to increase their supplies to the market when the prices are high since they accrue more returns. Movement along the demand and supply curves determines the price and the quantity of a commodity which will be bought and supplied in the market. The following figure shows the demand and supply curves which applies to the French butter industry.

The current shortage of butter being experienced in France can be explained based on the above graphs. A shift of the demand curve is caused by factors such as changes in average income and consumer preferences. The article explains that “The French consume more butter per capita than any other nation on earth” (Beardsley). Due to high per capita income, butter consumption in France is unmatched. The article also explains that there is a dramatic shift in attitude towards the consumption of butter. This is a change in consumer preferences that explain the sensational increase in demand for the commodity. Figure 2 shows this shift which has occurred in the French butter industry/market.

In imbalance between quantity demanded and quantity supplied either creates a surplus or a shortage. With regard to the French butter market, the demand curve shifts upwards as in Figure 2 due to changes in consumer preferences and real income. Notably, the suppliers or butter producers have not taken the initiative of manufacturing more butter to satisfy the escalating market demand. As a result, a situation of excess demand or shortage has ensued, and the following figure demonstrates it.

Figure 3: The butter shortage being experienced in France

In conclusion, the current butter shortage crisis in France is a macroeconomic problem. It is a result of an imbalance between the forces of demand and supply. It can be resolved only if these market forces gravitate towards equilibrium. Due to the escalating consumer demand, producers should be provided incentives for them to increase their butter production. These incentives include tax holidays and lowered cost of operating licenses. An increase in supply will eventually offset the excess demand, and thus, the shortage crisis will be resolved.        

(Word Count 558)

Works Cited

Beardsley, Eleanor. “Sacré Beurre: France Faces a Butter Shortage.” NPR.org, 27 Nov. 2017, www.npr.org/sections/thesalt/2017/11/27/566361607/sacr-beurre-france-faces-a-butter-shortage?utm_source=facebook.com&utm_medium=social&utm_campaign=npr&utm_term=nprnews&utm_content=2055. Accessed 19 June 2019.