ECO 365 Week 1 Scarcity, Choice and Supply and Demand Example

Why a Dozen Eggs Cost Six Dollars in 2025: Scarcity, Opportunity Cost and a Supply Shock Traced Through the Market for Eggs

[Student Name]

University of Phoenix

ECO/365: Principles of Microeconomics

Week 1 Assignment

[Instructor Name]

[Date]

The bakery owner is a composite written for a model paper; price data, the outbreak and research findings come from the sources listed and are stated generally.

Maria Ortiz, a composite bakery owner in Columbus, Ohio, uses about 90 dozen eggs a week for breads, cakes and custards. In the spring of 2024 she paid about $2.50 a dozen from her distributor. By February 2025, she was paying more than $7. The national average retail price of a dozen Grade A large eggs, as tracked by the Bureau of Labor Statistics (2025), reached a record above $6 in March 2025, roughly double its level a year earlier. Her customers asked why their custard tarts cost more. The answer begins with a basic idea in economics: when something becomes scarcer and people still want it, its price must rise until fewer people buy it. This paper explains that idea through the egg market.

Scarcity and Choice

Scarcity means that resources are limited relative to what people want, so every choice gives something up. Maria's choice to keep custard tarts on the menu meant spending about $400 more a week on eggs, money she could otherwise have used for a new mixer or extra staff hours. That forgone alternative is the opportunity cost of her choice (Mankiw, 2021). Every buyer of eggs faced a similar choice in 2025, and so did every producer deciding whether to rebuild a flock.

The Law of Demand

Under the law of demand, a higher price, with nothing else changing, leads buyers to purchase a smaller quantity. Eggs illustrate the law but also its limits. Households cut back somewhat, buying fewer eggs for baking and switching some breakfasts to other foods, and restaurants and bakeries reworked recipes. But eggs have few close substitutes in many uses, so the cutback was small. A demand curve plots this relationship, sloping downward from left to right.

The Law of Supply

The law of supply says that, other things equal, producers offer more of a good when its price rises, because higher prices cover higher costs and make expansion profitable. For eggs, supply in the short run depends mostly on the number of laying hens, which cannot change quickly: a new pullet takes about five months to begin laying. Higher prices therefore raise quantity supplied only a little in the short run.

Movements Versus Shifts

When only the egg price changes, buyers and sellers slide along curves that stay put. When some other influence on their decisions changes, the curve itself relocates. Income, tastes and the prices of related goods shift demand. Input costs, technology, the number of producers and events such as disease shift supply. Keeping the two kinds of change separate is the key to analyzing any market.

The Shock: Avian Influenza

Highly pathogenic avian influenza spread through commercial poultry flocks from 2022 onward, and a wave in late 2024 and early 2025 hit large egg-laying operations especially hard. When the virus is found, the entire flock must be destroyed to stop its spread, so tens of millions of laying hens were lost over a few months (U.S. Department of Agriculture, 2025). Fewer hens meant fewer eggs at every price, a leftward shift of the supply curve.

The New Equilibrium

Before the outbreak, the market cleared at a price near $3 a dozen at retail, where the quantity consumers wanted matched the quantity producers offered. After supply shifted left, at the old price consumers still wanted as many eggs as before, but producers could supply far fewer, creating a shortage. Stores raised prices, and as prices rose, quantity demanded fell along the demand curve until it matched the smaller supply at a much higher price. The new equilibrium combined a higher price with a modestly lower quantity.

Why the Price Rose So Far

The size of the price increase depended on how buyers responded. Because demand for eggs changes little with price, a given drop in supply requires a large price increase to reduce quantity demanded enough. Had buyers been very responsive, a small price rise would have balanced the market. Week 2 measures this responsiveness, called elasticity.

Price as a Rationing Device

High prices rationed eggs to those who valued them most. Maria kept eggs in custards, where they are essential, but replaced them with flax mixtures in some breads. Some households bought fewer, and some restaurants added egg surcharges. Without price increases, stores would have faced empty shelves and long waits, rationing by queue rather than price, as happened briefly in some places where stores limited purchases.

Price as a Signal

High prices also signaled producers to rebuild flocks quickly and encouraged imports of eggs from other countries. As producers restocked and the spring wave of infections eased, supply began shifting back to the right. Wholesale prices fell sharply in the spring of 2025, and retail prices followed more slowly.

The Bakery's Adjustment

Maria raised the price of a custard tart by 50 cents, reformulated two breads and bought eggs on a weekly rather than monthly contract to benefit sooner when prices fell. Each decision weighed the opportunity cost of her money and time against the value of keeping customers.

Demand Shifts Too

Demand did not stay perfectly still. Seasonal baking around Easter raised demand in spring, adding to price pressure, while news coverage of high prices may have encouraged some households to cut back further. These smaller shifts in demand were overwhelmed by the much larger shift in supply.

Was It Price Gouging?

Some shoppers suspected that producers used the outbreak to raise prices unfairly. The supply and demand model shows that a large price increase is what a competitive market produces when supply falls sharply and demand barely responds; no coordination is needed. Whether some firms also took advantage is a separate question that requires evidence on costs and conduct, and federal and state officials did review pricing in the industry. The model's contribution is to show that high prices alone do not prove misconduct.

Conclusion

Eggs became scarce in 2025 because avian influenza shifted supply sharply left. Because buyers kept purchasing eggs even as prices rose, the price had to climb a long way to bring quantity demanded down to the smaller supply. The higher price rationed eggs and signaled producers to rebuild, and as supply recovered, prices fell, showing the model of supply and demand at work in an everyday market.

References

Bureau of Labor Statistics. (2025). Average price data: Eggs, grade A, large, per doz. in U.S. city average (Series APU0000708111). U.S. Department of Labor. https://data.bls.gov/timeseries/APU0000708111

Mankiw, N. G. (2021). Principles of microeconomics (9th ed.). Cengage.

U.S. Department of Agriculture. (2025). Confirmations of highly pathogenic avian influenza in commercial and backyard flocks. Animal and Plant Health Inspection Service. https://www.aphis.usda.gov/livestock-poultry-disease/avian/avian-influenza/hpai-detections/commercial-backyard-flocks