Fish prices spike at Chinese New Year because festive demand rises sharply while the supply of fresh fish is close to fixed in the short run. The catch cannot be increased quickly and fish is perishable, so supply is price inelastic, drawn as a steep curve. When demand shifts right against an inelastic supply, almost all of the adjustment shows up as a higher price rather than a higher quantity. Demand for the reunion dinner fish is also price inelastic, a must have by tradition, so sellers can pass the rise on. It is demand, supply and elasticity, not greed.
In the few weeks before Chinese New Year, the price of a good fish at the wet market can climb to twice its usual level, and every year someone declares that the sellers are simply cashing in. Then, a fortnight after the festival, the price drifts back down and the accusation is quietly forgotten. There is a far more interesting explanation than greed, and it happens to be the first diagram you ever draw in economics, demand and supply, showing off what it can do.
Pull the story apart and it is built from three syllabus pieces you already know: a shift in demand, the price elasticity of supply, and the price elasticity of demand. Put them together and the doubling price is not a scandal, it is a prediction. Once you can see it here, on a fish, you can see it in concert tickets, in hotel rooms over a long weekend, and in a dozen exam questions.
A surge in festive demand
Start with demand. A particular fish, often a fresh one served whole, sits at the centre of the reunion dinner, partly for taste and partly for symbolism, since the word for fish sounds like the word for surplus and abundance. So in the run up to the festival, a great many households want that fish in the same narrow window. The demand curve shifts to the right, from D0 to D1, not because anything about the fish changed, but because the occasion did. This is a textbook rightward shift in demand driven by tastes and seasonality.
- A shift in demand
- Festive tastes move the whole demand curve to the right, from D0 to D1, because far more households want the fish in the same short window.
- Price elasticity of supply
- How much quantity supplied responds to price. For fresh fish in the short run it is low, because the catch cannot be scaled up quickly, so supply is inelastic and the curve is steep.
- Price elasticity of demand
- How sensitive buyers are to price. For the reunion dinner fish it is low, a near must have, so buyers absorb the rise rather than walk away.
Why the price jumps so much
Now the key piece, the one that turns a small story into a big price move: the supply of fresh fish is close to fixed in the short run. You cannot simply catch a lot more fish this week because demand is high, fish stocks and boats and quotas do not respond to a festival, and fresh fish is perishable so it cannot be stockpiled months ahead. Supply is therefore price inelastic, and we draw it as a steep curve: quantity barely responds, however high the price climbs.
Put a rightward shift in demand against a steep, inelastic supply curve and the result is almost entirely a higher price, with only a small rise in quantity. There is no slack in supply to absorb the extra demand, so the whole adjustment is forced into the price. That is the doubling. The diagram below is the entire explanation.
Read it off the figure. The two demand curves are close together, an ordinary seasonal rise. But because supply is so steep, the equilibrium climbs steeply up that curve, and the gap between P0 and P1 is large while the gap in quantity is small. Flatten the supply curve, make it elastic, and the same demand shift would barely move the price. The spike is a story about supply that cannot respond, not about demand that went mad.
Elasticity of demand does the rest
There is a second elasticity quietly at work. If buyers responded sharply to the higher price, they would switch to chicken or a frozen fish and the price could not rise far. But for the reunion dinner specifically, demand is price inelastic: the fish is a tradition, a once a year centrepiece, so households are willing to pay a premium rather than go without. Low price elasticity of demand is what lets the sellers pass the higher price on without losing their customers. After the festival, that urgency disappears, demand becomes more elastic again, and the price falls back.
The spike is a story about supply that cannot respond, not about demand that went mad.
In an exam, the weak answer says prices rise because sellers are greedy or are taking advantage. That earns almost nothing, because it is a moral claim, not an economic one. The marks are for the mechanism: a rightward shift in demand, meeting a price inelastic supply, producing a large price rise and a small quantity rise, reinforced by price inelastic demand for a festive necessity. Greed is constant all year; the price spike is seasonal, so greed cannot be the explanation. The elasticities are.
Asked why a price rose sharply in a particular season or after a shock, do not just assert it. Name the demand shift and its cause, state the price elasticity of supply and explain why it is low here, then show that an inelastic supply forces the adjustment into price rather than quantity. Bring the diagram. Then evaluate with elasticity of demand and the time frame. A model sentence: "Because the supply of fresh fish is price inelastic in the short run, the festive rise in demand raises the equilibrium price far more than the quantity, and the low price elasticity of demand for a traditional dish allows that higher price to be sustained until the season passes."
- The spike is demand, supply and elasticity, not greed. Greed is constant; the price move is seasonal.
- Festive demand shifts the curve right, from D0 to D1, driven by tastes and symbolism in a narrow window.
- Supply of fresh fish is price inelastic in the short run, because the catch cannot scale quickly and fish is perishable, so the curve is steep.
- A demand shift against inelastic supply raises price far more than quantity. That steepness is the whole spike.
- For the exam, name the demand shift, the inelastic supply, the small quantity move, then evaluate with elasticity of demand and the time frame.
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Frequently asked
Why do fish prices go up during Chinese New Year?
Because festive demand for fish rises sharply in a short window while the supply of fresh fish is close to fixed. The reunion dinner fish is a tradition, valued partly for the symbolism of surplus and abundance, so many households want it at once and the demand curve shifts right. At the same time the catch cannot be increased quickly and fish is perishable, so supply is price inelastic. When demand rises against an inelastic supply, almost all of the adjustment shows up as a higher price rather than a higher quantity, which is the spike. It is demand, supply and elasticity, not sellers being greedy.
What causes seasonal price increases?
Seasonal price increases happen when demand rises in a particular period faster than supply can respond. If supply is elastic, sellers simply provide more and the price barely moves; but when supply is price inelastic, fixed in the short run, perishable, or capacity constrained, the extra demand is forced into the price instead of the quantity. Festive food, hotel rooms over a long weekend and flights in the school holidays all follow the same pattern: a rightward shift in demand meeting a supply that cannot expand quickly.
How does elasticity affect prices?
Elasticity decides how a change in demand or supply splits between price and quantity. When supply is price inelastic, a rise in demand pushes up the price a lot and the quantity only a little, because producers cannot respond quickly; when supply is elastic, the same demand rise mostly raises quantity and barely touches price. Price elasticity of demand matters too: if buyers are insensitive to price, a must have at a festival for example, sellers can pass a rise on, whereas sensitive buyers would switch away and cap the price. Most real world price spikes are an elasticity story.
Are sellers being greedy when prices rise at festivals?
Not in any way economics can measure. Greed, if it exists, is constant across the year, but festive price spikes are seasonal, so a constant motive cannot explain a seasonal change. The economic explanation is that demand rises sharply against a supply that cannot expand quickly, an inelastic supply, so the price has to do the adjusting. After the season demand falls back and so does the price. Blaming greed is a moral claim; the demand, supply and elasticity mechanism is the economic one, and it is the one that earns marks in an exam.
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