Assume that there is a shortage of lobster and that for whatever reason prices have not risen to choke off the excess demand

Question

Instead, the government has exhorted people to voluntary refrain from lobster consumption to "maintain a balance between supply and demand." Assume that the temporary public service announcements are "effective" and the public reduces its consumption of lobster. Explain using supply and demand analysis what should happen to the equilibrium quantity of lobster and its equilibrium price. Why would this plan not have much of an impact on the lobster market in the long run?

Answer 1

The reduction in demand would keep prices from rising. But it would also result in a decrease in the equilibrium quantity of lobster sold in the market as fishermen move down and along their supply curve and cut back production. This plan is not likely to have much effect in the long run since the campaign is temporary. As soon as the government stops making the public service announcements or as people simply go back to their same demand preferences it is likely in the long run that an increased demand for lobster will result in higher lobster prices and a higher equilibrium quantity of lobster.