Wednesday, March 28, 2012

Apple economics and government mandates: An Apple a Day Keeps the Doctor Away Act

What would happen if the government enacted a health law, entitled An Apple a Day Keeps the Doctor Away Act, mandating every adult citizen to buy one apple for each day? 
The demand for apples would increase by mandate; the supply of apples would have to increase by market force.
More people buying apples would require more apples.
Apple orchard farmers would be motivated to produce more apples, eventually planting new apple trees on land previously used to grow other fruits and vegetables.
Apple wholesalers, responding to an expanded apple market, would bid and pay more to acquire apples that are in short supply. 
Apple prices would increase to chase the new market value of apples.
Grocers would need to charge more for apples in order to sustain a smaller inventory against an increased demand while compensating for the higher cost of bringing the apples to market.

Market apple prices would increase to counter any scarcity created by higher demand without pressures from competitive pricing.
Everybody has to buy an apple.
There would be less incentive for the grocer to shine the apples, put the apples in fancy display cases, or worry about the quality of their apples since the transaction of purchasing an apple is mandated by law.
As the cost of apples increase poorer citizens will be unable to afford the apples let alone the premium-shined-fancy-display case apples and thus question the fairness of the law.
The government might place a price ceiling on apples to ensure justice for the apple eating populace.
With grocers being forced to sell apples at an artificially low government mandated price their profits on apples would decrease.
Grocers might opt-out and decide not to sell apples.
Grocers deciding not to sell apples to the general public would cause another scarcity of apples. 
The government might pass an extension to An Apple a Day Keeps the Doctor Away Act that forces, by penalty of a fine, any grocer selling other fruits and vegetables to sell apples.
Apples for sale in the grocery store might end up in a barrel, bruised and unwashed as the grocer complies with the law mandating that they provide price controlled apples to their customers at a loss.
Producing and selling apples becomes an issue of quantity rather than quality.
Apple orchard growers, unable to sell their higher yield of apples for the price it cost them to increase that yield might return apple lands to more profitable other fruits and vegetables.
Apple shortages would occur as the mandated market demand for apples collides with the price ceiling.
Government, to provide the public with the affordable apples required by mandate, would subsidize apple orchard farmers to maintain a healthy supply for the artificially created demand.
The cost of these subsidies would be taxed from and paid for by the apple eating public.
To keep the government's An Apple a Day Keeps the Doctor Away Act tax "fair" the tax would need to be confiscated from the wealthier citizens who can easily afford apples at any price.
Apple orchard farmers would be paid and regulated by law to convert additional lands to apple production and less land for other fruits and vegetables.
Farmland once used for other fruits and vegetables would be reduced. 
Reduced supply of other fruits and vegetables would result in higher costs from grower to the grocer.
Grocers selling apples from barrels at zero profit while paying more to stock other fruits and vegetables would need to raise prices to maintain the profit margins that existed before An Apple a Day Keeps the Doctor Away Act. 
Customers would have cheap subsidized apples at the expense of paying more for other groceries...