Economics, 3rd Edition

Demand for Seafood in China

At the time of writing there is still a significant proportion of the Chinese population who live in abject 

poverty, However, rapid economic growth in China in the past 20 years has meant that there is now a  

population group who are becoming increasingly wealthy in that their incomes are rising. When incomes 

rise, people are able to purchase more goods and services, and this can have an effect on some industries 

more than others.

The effect will be dependent on the income elasticity of demand. Rabobank, a cooperative financial 

services provider, estimates that the income elasticity of demand for fish in China is much higher than 

for meat and as incomes rise this has implications for those in the fishing industry. There will be firms 

in China involved in catching and processing fish, of course, but there may also be opportunities for 

firms in other countries to boost exports of fish to China. The ability of China to satisfy the growing 

demand for fish is likely to be constrained by the amount of resources available to satisfy the grow-

ing demand – in other words, the price elasticity of supply is relatively inelastic in the short run. This 

leaves gaps in the market which can be satisfied by exporters. For example, Rabobank reports that 

European exports of Atlantic salmon have risen from extremely low levels to in excess of 12,000 tonnes 

since 2000 and the total seafood export market to China could be worth around 

€15.7 billion by 2020. If 

income elasticity of demand was much lower then the opportunities for fish exporters in Europe would 

be much less.

At th ti

CASE STUDY

Fish farms like this in China 

may help to meet some of 

the rising demand for fish 

in the country but the price 

elasticity of supply of fish in 

the short run is likely to be 

inelastic.

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CHAPTER 4  ELASTICITY AND ITS APPLICATIONS  83