Topic:

Impact of COVID-19 on the price of eggs in Thimphu

Submit to: Mr. Jit Tshering
Unit: Economic Principles
Submitted by: Yeshi Wangchuk ‘B’
Student ID: RIM/2020/3282
PGDPA (2020)
Impact of COVID-19 on the price of egg at Centenary Farmer’s Market at Thimphu
Background

Bhutan achieved egg self-sufficiency in 2012 according to the agriculture ministry. In 2016,
Bhutan started to export eggs to India. Since Bhutan was producing excess eggs its price dropped
drastically in the local markets. Therefore, the government exported eggs to India on a trial
method. Bhutan continued to produce good amount of eggs until the pandemic, COVID-19, in
2020.

Problem Statement

Due to the closure of the border gates, which stopped the import of meat and bird feed, the price
of the egg in Bhutan rose significantly. The price for a tray of egg cost ngultrum 200 in May
which increased to ngultrum 420 in June.

Objective

This paper will show the difference between the price of the egg in Thimphu before and after the
pandemic. It will also suggest or recommend possible solutions for the problem.

Before COVID-19 situation

Equilibrium Price
Price

0 Equilibrium Quantity X
Quantity of egg
Figure 1. The graph of equilibrium quantity and price before pandemic
Before the COVID-19 pandemic, when the situation was normal, everyone in the market was
satisfied. The quantity of egg supplied in the market is in equilibrium with the quantity
demanded by the buyers in the market leading to the equilibrium price in the market.

After COVID-19

Y S1
S
P1
P
Price

0 Q1 Q X

Quantity of eggs

Figure 2. Increase in price for egg with decrease in its supply

The COVID-19 impacted the price of the eggs at the Centenary Farmers’ Market in Thimphu.
COVID-19 led to the closure of border gates which negatively impacted the import of feeds,
mother stocks and day old chicken who lay eggs. This negative impact led to the reduction of the
production of the eggs within the country. In figure 2 the supply curve shifts from S to S1 as the
supply of the eggs reduces. This led to the decrease in equilibrium quantity from Q to Q1 and
increase in the equilibrium price from P to P1.

Moreover, the above situation was coupled with the reduction in the supply of the substitute
goods for eggs such as meat and fish from India that led to the increase in the demand for eggs
leading to the increase in price for eggs. The figure 3(below) represents the increase in price
caused by increase in demand of eggs due to decrease in supply of its substitute goods. The
demand curve shifts from D to D1 (increase) due to reduction in the supply of substitute goods
such as meat leading to increase in equilibrium price from P to P1.

Y
S
P1
Price

D1
D
0 Q Q1 X

Quantity of egg

Figure 3. Increase in demand of egg led to increase in its price

Solutions
1. Promotion of local production of feeds and starting production of mother stocks.

Promoting local production of feeds and starting a production of mother stocks within the
country would help reduce the price of the eggs. If local production of feeds is promoted and
start a production of mother stocks, the supply of eggs will be increased which will lead to
the reduction of egg price.

Y S1 the supply curve shifts due to

S decrease in mother stock
P1 S2
P
Price

P2

0 Q1 Q Q2 X
Quantity of eggs
Figure 4. Decrease in price due to increase in production
In the above diagram, the supply curve shifts from S1 to S2 (increase in supply) due to the
establishment of production of mother stocks and promotion of local production of feeds leading
to the decrease of price from P1 to P2.

2. Increasing its substitute goods.

Another solution for the rise in price for eggs could be reducing the demand of it. If we produce
its substitute goods locally, the demand for eggs will go down which will lead to the reduction of
its price. In figure 5, the egg demand decreases from D to D1 due to the increased production of
its substitute goods, leading to decrease in the price of egg from P to P2.
 Y

S
P
price

P2

D
D1

0 Q1 Q X

Quantity of eggs

Figure 5. Increase in substitute goods reduces the demand of egg leading to reduction of price.