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You may have noticed signs in supermarkets apologising for the lack of Bourbons and Custard Creams on the shelves in recent months, due to the flooding of the United Biscuits factory in Cumbria around Christmas. There are lots of great AS microeconomic applications to be drawn from the Great Biscuit Shortage.

The British public typically eat 34,000 tonnes of biccies with their cuppas every month, and the shortage prompted some customers in panic buying and hoarding of their favourite dunkers. The natural economic response should have been to increase prices of our standard biscuits and allow the price mechanism to ration out biscuits to those with "effective demand" - but this hasn't happened. Perhaps demand for classic biscuits is fairly elastic - lots of substitutes (cake? fruit?) or perhaps if the price had risen, consumers would have switched to posher, more indulgent cookies.

Interestingly, the supermarket Asda hasn't reported any issues - it seems that they had stockpiles of essential biscuits allowing them to respond quickly to the shortage - Asda seems to have price elastic supply of standard biscuits. However, this isn't the case for all biscuits. Carrs, based in Carlisle, makes "water biscuits" which have been made in the same traditional ovens since 1837 - there are no other production facilities at all. Supply of these water biscuits is pretty price inelastic.

If Ginger Nuts are your biscuit of choice, then click here for a short BBC news clip on their shortage.



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