Companies are said to be in business if they can maintain the supply of the preferred commodities and maintain the price levels of those commodities. When the supply of a certain commodity decreases, there is always an increase in price. Those companies that rely on such a commodity wholly are in a risk of collapsing if they are not in a position to substitute the commodity with another, which the customers would find satisfaction.
When supply decreases, prices increase
The supply of the Gulf Coast oysters has been on the decrease owing to the fact that the prolonged swath of toxic algae has delayed the harvesting season. As the oysters feed on the toxic algae, they also become toxic to the humans who may consume it since they may cause some stomach distress and nausea. This means that the restaurants would need to desist from selling them and rely on the limited supply of edible oysters to serve their customers.
As the supply decreases, there is always a tendency of the price to rise in order to balance the two – price and supply (Vienneau 616). If the price were to remain the same, the people would quickly buy off all the oysters and deplete all the supplies. This mechanism is meant to regulate the buying rate of the rare commodity so that it can still be in the market. With the increase in price, the restaurants would be able to maintain their profits levels even with the low supply of the oysters.
Short-run companies stay while long-run companies leave
In such a situation where the supply of a commodity is cut down, the effects that it would have on companies would be varied depending on the nature of the company. For example, the long-run companies that rely wholly on that commodity for its business would need to close down due to the lack of an alternative commodity to sell or having no other options in terms of supply.
However, the short-term companies may be able to maintain a steady supply by venturing into other areas to get the supplies. Another option would be to get an alternative good to supply and satisfy their customers. This way the company would be able to maintain the customer base and survive the term of shortage.
Looking for substitute goods
During a time of shortage of such an important commodity in the market, other companies may be forced to introduce a new commodity into the market in order to remain in business. This new commodities may not be as appealing to the customers as the previous commodity but the customers may accept it due to the relative satisfaction obtained from it. The commodity might be made more appealing by reducing the buying price. This would make it affordable to the customers and may serve as a substitute for the time being.
In the case of the companies reported in the newspaper, they could try to substitute oysters for some other commodities such as the shrimp, crabs and fish. These commodities were unaffected by the toxic algae since the toxins were not accumulated in the edible portions of the animals. This way, the customers would be able to enjoy the diet and the company would maintain its profits levels.
Business is all about making profits and this requires the company to maintain its customer base. The company can only do this by maintaining its quality of products or to maintain the supply of the commodity that is most preferred by the customers. When this does not happen, there is likelihood to lose the customers and therefore, the company needs to look for alternative goods to maintain the customers’ satisfaction levels.
Vienneau, Robert. “On labour demand and Equilibria of the firm.” Manchester School 73.5 (2005): 612-619. Print.