Chuan Chuan's Chow Not Cheap
Subject Comparative statics
Topic Equilibrium, Government and the Economy
Key Words Substitute, demand, supplier, subsidies, command system, market system, money, loan, prices
News Story

In Shanghai, Chuan Chuan the giant panda, like other urban zoo pandas, has a voracious appetite for certain kinds of young bamboo. Although he has substituted bread, milk, apples and eggs to some extent, he still devours over 65 pounds of bamboo stalks and leaves a day. His two-year old son Le Le now eats more than he does.

The problem is that the zoo is having difficulty finding and affording sufficient bamboo. Farmers are turning over their bamboo plantations to other crops because bamboo straw has been replaced by plastic for items such as baskets. The main supplier to the Shanghai zoo is unable to meet the zoo's demand. The additional supplier is far from cheap. This is compounded by the reduction of subsidies from the government as the economy has moved from a command system to a market system. Zoos are forced to raise money in other ways, such as through loaning pandas to foreign zoos for hefty prices. Businesses and individuals are being encouraged to adopt an animal in return for having their names honored on plaques next to the cages.

In the interim, Shanghai residents have been donating bamboo from their backyards, transporting it on bicycles. Others have offered land so that the zoo can grow its own bamboo.

(Updated November 1, 2000)


Draw a supply and demand diagram of the market for bamboo. Show the equilibrium price and quantity. Explain and draw what happened when
a) More captive pandas were born
b) Plastic became a cheap substitute for straw
c) Other crops became more profitable to cultivate
d) Pandas changed their diets toward other foods

2. Now draw a diagram of the supply of and demand for captive pandas. Again, show the initial equilibrium price and quantity.
a) Illustrate the effect of the change in the price of bamboo you identified in Question 1 on the equilibrium in the market for captive pandas.
b) Also demonstrate what happened as a result of the reduction of subsidies to zoos.
c) Explain how this can account for the prices charged foreign zoos for loaned pandas.
d) How will monetary and bamboo donations help the situation? Illustrate your reasoning.
Source Ching-Ching Ni, "Prices eat away at panda upkeep," The Philadelphia Enquirer, August 20, 2000.

Return to the Equilibrium Index
Return to the Government and the Economy Index

©1998-2001  South-Western.  All Rights Reserved   webmaster  |   DISCLAIMER