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How the egg breaking rampage affects egg prices

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Reference no: EM13106894

A group of rogue French farmers has gone on a furious egg breaking rampage, destroying tens of thousands on roads and pledging to smash many more in protest against low egg prices.

"More than 100,000 eggs were destroyed in the Cotes d'Armor (a division of Northwest Brittany) a spokesman for the unnamed collective of angry poultry farmers told AFP.

Poultry farmers in France have for months complained of rock-bottom egg prices due to overproduction - a problem that also affects other countries in the European Union.They say that current prices do not compensate for a rise in production costs or investments that they made as part of an EU directive of January 2012 to protect the well-being of laying hens.Their spokesman said that masked farmers had broken the 100,000 eggs overnight from Tuesday to Wednesday near Lidl supermarket and on a roundabout as reported in local media. 

"We will continue to destroy 100,000 eggs a day until Sunday and become more radical with inevitable collateral damage if the group's demands are not met" said their spokesman".  He also said that destroying 100,000 eggs a day equated to "five per cent of the production" of poultry farmer members of the collective.

The group called for France's entire production to be reduced by five per cent to help raise prices, and asked the government to set up a specific area for eggs to be destroyed.  According to Yves-Marie Beaudet of the egg section of the union that represents poultry farmers in Brittany, producers currently get paid 75 cents ($1.12 AUD) for a kilogram of eggs whereas the cost price is 95 cents.  The UGPVB union says that the EU has "15 to 20 million" excess laying hens out of a total of approximately 350 million.

(a) Explain and illustrate with a suitable diagram the cause(s) of low egg prices in France.

(b) Explain and illustrate with a suitable diagram how the egg breaking rampage affects egg prices?

(c) Explain and illustrate with a suitable diagram the impact on egg prices if demand fell by 5%

(d) Would you consider the demand for eggs to be elastic or inelastic?  Explain your reason.

(e) Illustrate and explain with a diagram how can the Government intervene and correct this situation?

Reference no: EM13106894

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