Fig 1.
Demand and supply equilibrium associated with reduced milk production following an outbreak of Johne’s.
In Fig 1, the intersection of supply curves, ,
, and
, and demand curve,
, determine the initial equilibrium market price, P0, and quantity supplied by the market,
, the infected producers,
, and uninfected producers,
. A decrease in milk production associated with the introduction of Johne’s shifts the infected producer supply curve backward to
, the equilibrium quantity supplied by infected producers will decrease, from
to
, and the price increases, from P0 to P1. Uninfected producers will increase their supply from,
to
, in response to a price increase (i.e. a movement along their supply curve). Overall, the total market supply, QT = QU + QI, will decrease, from
to
, because
.
Fig 2.
Impact of an inelastic and elastic demand curve on equilibrium market price and quantity.
The impact of an inelastic and elastic demand curve on equilibrium market price and quantity associated with a reduction in milk production following an outbreak of Johne’s disease. The inelastic, DIn, and elastic, DEl, demand curve determine the responsiveness of consumers to new equilibrium market price, P1. A more inelastic demand curve, DIn, (i.e. the demand curve is steeper in shape) reflects a larger loss in economic welfare, represented by shaded area, relative to a relatively more elastic demand curve, DEln, represented by area.
Fig 3.
Impact of an inelastic and elastic supply curve on equilibrium market price and quantity.
The impact of an inelastic and elastic supply curve on equilibrium market price and quantity associated with a reduction in milk production following an outbreak of Johne’s disease. The inelastic, SIn, and elastic, SEl, supply curves determine the responsiveness of producers to new equilibrium market price, P1. A more inelastic supply curve, SIn, (i.e. the supply curve is steeper in shape) reflects a larger loss in economic welfare, represented by area, relative to a relatively more elastic supply, SEl, represented by area.
Table 1.
Costs associated with the presence of Johne’s disease.
Table 2.
Economic welfare model input parameters.
Table 3.
Net economic surplus for stakeholder groups (i.e. infected producers, uninfected producers, consumers) and Scotland in a year following the introduction of Johne’s under alternative national herd prevalence scenarios (i.e. 7.5%, 17.5% and 27.5%) in million pounds [million eurosa].
Table 4.
Net economic surplus for stakeholder groups (infected producers, uninfected producers, consumers) and Scotland in a year following the introduction of Johne’s, per cow and household under alternative Johne’s disease national herd prevalence scenarios (i.e. 7.5%, 17.5% and 27.5%) in pounds [eurosa].
Fig 4.
Sensitivity of net economic surplus for Scotland to elasticity of demand and supply.
The sensitivity of aggregated net economic surplus (million £) for Scotland following an outbreak of Johne’s with respect to variation in the elasticity of demand, η, (-0.50 to 0.00), and elasticity of supply, ε, (1.5; 1.6; 1.7; 1.8; 1.9; 2.0).
Fig 5.
Sensitivity of net economic surplus to the elasticity of demand by stakeholder group.
The sensitivity of net economic surplus (million £) to elasticity of demand by stakeholder group (i.e. uninfected producers; infected producers; consumers; Scotland) following an outbreak of Johne’s with respect to a constant elasticity of supply, ε, (1.759), and a variation in the elasticity of demand, η, (i.e. -0.45 to 0.00).
Fig 6.
Sensitivity of net economic surplus to national herd prevalence by stakeholder group.
The sensitivity of net economic surplus (million £) to national herd prevalence by stakeholder group (i.e. uninfected producers; infected producers; consumers; Scotland) following an outbreak of Johne’s with respect to a constant elasticity of demand, η, (-0.2198), and elasticity of supply, ε, (1.759).
Fig 7.
Demand and supply equilibrium associated with binding and non-binding milk quotas.
In Fig 7, the intersection of supply curves, S0, demand curve, D, and milk quota, S**, determine the initial equilibrium price, P0*, and quantity supplied by the market, Q0*. A decrease in milk production associated with Johne’s disease shifts the supply curve backward to S1. In panel 1 the milk quota is binding before Johne’s because Q0*> Q** (quantity associated with milk quota S**), but not binding after Johne’s because Q1* < Q**, the price increases from P0* to P1,* above producer price, PP. In the case of binding milk quotas (panel 2), the equilibrium quantity supplied is restricted to Q** creating a new supply curve (S**), because Q1* is above the binding milk quota, and fixed price, PP.