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-During the avian flu outbreak, a significant portion of the chicken population was wiped out. Leading to the sharp reduction in egg supply.

-This created a supply shock, which is a type of market failure because the market couldn’t adjust quickly enough to maintain stable prices or availability.

-The outbreak also caused unintended consequences such as consumer panic buying, which lead to higher prices and an even more limited supply.

-There were also information imperfections, many consumers and businesses did not initially understand the extent of the supply disruption or how long it would last.

-This lack of information contributed to the irrational buying behaviors and overreactions in the market.

-The standard market equilibrium model was challenged by the bird flu crisis because unpredictability of the supply.

-The market experiences price spikes and shortages, which are inconsistent with the smooth adjustments assumed by the standard model.

-Market power became more evident as large producers who remained unaffected gained the ability to set higher prices due to limited competition

-Overall, the egg crisis demonstrated how unexpected shocks like disease outbreaks can render the standard market model ineffective in the short-term. Real world conditions such as panic, limited alternatives, and policy delays complicate market responses.

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Increase in egg prices.                                                                                 John McCracken, Investigate Midwest. “Egg Prices Continue to Swing Drastically, Cracking Already Strained Grocery Budgets.” Investigate Midwest, 3 Apr. 2025, investigatemidwest.org/2025/02/03/egg-prices-continue-to-swing-drastically-cracking-already-strained-grocery-budgets/.     

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Increase in egg prices and decrease in egg supply

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Increase in egg prices and decrease in egg supply

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Key stakeholders that are being affected by the bird flu and egg shortage are consumers and restaurants. Consumers and restaurants are having to pay up to 67% - 183% more for eggs because of the egg shortage. Restaurants in particular are being affected the most, for two main reasons. First, restaurants are having supply chain issues, some restaurants can't get their hands on eggs at all. The second issue is that if restaurants can get their hands on eggs, they have to pay up to $1 - $2.75 more for eggs. Which means restaurants have to increase their prices for meals that include eggs. Some consumers are opting to choose a cheaper option and don't want to pay more for meals with eggs. This leads to a lot of restaurants removing meals that include eggs from their menu. Restaurants have explored options, including homegrown eggs. The increase in the price of eggs and the decrease in supplies have increased the concerns of restaurants and consumers that other food prices might soon follow these same trends.

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Abbott Nutrition's Baby Formula Crisis  (2022) 

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Abbott Nutrition's Baby Formula Crisis  (2022) 

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The recent rise in egg price mirrors the price shock that occurred in the baby formula market in 2022. The shutdown of Abbott Nutrition's plan, which controlled 40% of the U.S formula market, was due to reports of Chronobacter sakazakii and Salmonella contaminated their products. This created a severe shortage and drove prices up for this inelastic product.

Similarly, illness and bacteria were also the cause of the supply shock for the egg market, triggering inflation and high consumer costs. As a result, the U.S enforced the Defence Productoin Act to force suppliers to prioritize baby formula production and the diversification of the market. Similar measures, like subsidizing chicken feed and lowering borrowing costs, could help ease the egg market shock.

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In this image, the graph illustrates the economic impact of a supply shock in inelastic markets. This is a graph of the egg market when the chickens had to be euthanized. However, as described, the market for Abbott baby formula will have the same shift due to the plant being shut down in 2022. In both cases, external health-related factors, such as bacterial contamination for formula and illness among hens for eggs, triggered a sudden and significant reduction in supply, shown by a leftward shift in the supply curve. Since demand for these goods is inelastic, meaning consumers still need them regardless of price, the result was a sharp increase in price and a decrease in quantity available. The inelastic nature of demand also meant that consumers had few alternatives, often leading to store shortages, and rationing.

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Egg suppliers could be argued as winners, since they are charging so much for their eggs. However, most suppliers don't have much supply. Which, in the end, makes them more likely to be losers, since they are losing money.

Restaurants and consumers are the losers, since they have to pay more for eggs. They also have to deal with limited supplies. This causes restaurants and consumers to either buy fewer eggs or no eggs at all. Restaurants have to decide whether to charge more for eggs or to take eggs off their menus.

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Positive Analysis

Egg prices have increased by 67%-183 % of their normal price of around $1.50.

Egg supply has also decreased because of the bird flu epidemic.

This is causing consumers to buy fewer eggs because they don't want to pay that much for eggs.

Normative Analysis

The USDA invested almost one billion dollars to correct the egg market

Another strategy is invoking the Defense Production Act, forcing companies to produce eggs to balance the market by creating a price ceiling on egg companies.

It is unfair that consumers have to pay 67%-150% more for eggs.

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The USDA has invested one billion dollars to combat the egg crisis. The USDA increased funding to implement better safety measures on farms. These safety measures significantly decrease the chance of another outbreak. They have also increased relief for farmers who are currently struggling. Lastly, they increased funding for vaccines, which in the future will hopefully prevent outbreaks.

These measures seem to have had some impact on the egg crisis. Egg prices have slowly started to decrease across the nation, but are still very high. It is too early to tell if the USDA plan will ultimately work or not. Whatever happens in the next couple of months, the USDA plan is a step in the right direction. Even if prices don't decrease as much as expected, at least the USDA plan will decrease the chance of future outbreaks.

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-We choose the egg crisis that started in 2022, because of the nationwide outbreak of the contiguous flu that broke out within the chicken population.

-Millions of infected birds had to be killed off to stop the bird flu from spreading.

-The supply of eggs had a major decrease, which created a noticeable demand problem in the US.

-Consumers noticed a spike in prices and a decrease in supply which lead to many people buying in bulk.

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The equilibrium model helps analyze market shocks and their impact on supply and demand.

A sudden shock, such as an avian flu outbreak, reduces the supply of eggs.

This causes the supply curve to shift left, creating a temporary shortage at the original equilibrium price.

As a result, there is upward pressure on prices.

When prices rise, the quantity demanded by consumers decreases.

Producers may be incentivized to increase supply in response to higher prices.

A new equilibrium is eventually reached at a higher and lower quantity than before the market shock.

The model shows how markets adjust to disruptions and find a new balance between supply and demand.

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-The USDA is investing $500 Million into safeguards for farms as a way of preventing another outbreak of the Avian Flu to the scale that caused the current egg shortage.

-$400 Million to help accelerate the repopulation of the egg laying chickens that were lost due to the Avian Flu outbreak.

-$100 Million targeting and strategy for new vaccines, therapeutics, and other innovative solutions to minimize depopulation of egg laying chickens

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-Reducing the US export of eggs would create more supply domestically but could upset trade partners

-Importing of eggs into the US would also create more supply bringing the market closer to equilibrium

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Unlike many other markets. Using the Defense Production Act would be tough to fix the egg shortage due to the egg market relying on chickens to lay the eggs before they are collected and sold.

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Market Shock:

-An unexpected event that disrupts market equilibrium.

-In this case, the outbreak of avian flu (bird flu) dramatically reduced the supply of eggs.

Supply and Demand:

-Egg supply dropped sharply due to the euthanasia of millions of hens. Due to trying to stop the spread of bird flu.

-Demand remained high, as eggs are a kitchen staple.

-A decrease in supply will increase demand for eggs.

-Shortage: When the quantity demanded exceeds the quantity supplied.

Equilibrium Model:

-The supply curve shifted left, creating a new equilibrium at a higher price and lower quantity.

- Decrease in supply: A shift of the supply curve to the left.

-The model helps explain the adjustment in price and quantity after the market shock. As seen in the explanation of “Application of Equilibrium Model.”

Inelastic Demand:

-Eggs are a staple good, so even when prices rise, consumers will still purchase them.

-This inelasticity gives producers room to raise their prices.

Government Intervention:

-The USDA invested over $900 million to combat the egg crisis.

-To increase relief for farmers.

-Increased funding for vaccines.

Willingness to pay

- The maximum amount a buyer would be willing to pay for something. To convert costs or benefits into their monetary equivalent, ask yourself: “What is the most I am willing to pay to get this benefit (or avoid that cost)?”

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Check out this article about the "Egg Crisis"

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Check out this article about the "Egg Crisis"

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The ‘Egg Crisis’ – Another Pseudo-Inflation Phenomenon

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Egg prices have come to symbolize Inflation-in-general. They surged at the end of 2022 – but have fallen rapidly, down over 40% since the beginning of the year. Most media accounts are now a month behind the story, working from stale data.