The prices of livestock in Saudi Arabia often go up significantly, especially, during Ramadan and Hajj. A sheep price jumps by almost 50 percent near Eid Al-Adha festival . The best quality sheep may sell for $400 during normal days but it may sell for as high as $800 in the days before Eid Al-Adha. The dealers argue the high prices are justified due to the rising costs of the feed. Saudi agricultural minister Fahad Balghunaim also attributed higher prices to the high cost of poultry due to production shortage and as a result, local suppliers were able to meet only 45 percent of the demand in Saudi Arabia . Many buyers do not believe the dealers are honest and are convinced the dealers are only exploiting buyers who have no choice but to buy sheep to fulfill their religious obligations.

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This situation can be understood through the economic concepts of demand and supply and price elasticity of demand. The supply of sheep has gone down because the production costs have gone up as a result of more expensive feed. The demand for sheep exceeds the supply of sheep near Eid Al-Adha which puts upward pressure on the prices due to excess demand. As the Saudi minister pointed out, the suppliers could only fulfill 45 percent of the demand which also explains rising prices of sheep and other livestock. This issue can also be better understood through the concept of price elasticity of demand. The price elasticity of demand refers to the proportional change in demand as a result of proportional change in price. It is clear the demand for sheep is price inelastic because the buyers have no choice but to buy sheep due to their religious obligations. In addition, there are no or very few substitutes. When the demand is price elastic, the sellers increase revenue by raising the prices and Saudi cattle sellers are exacly doing this. They may sell fewer sheep but their total revenue will still increase since the proportional decline in demand will be less than the proportional increase in price.

Works Cited

  • Jiffry, Fadia. High sheep prices make buyers ‘ma’ad’. 18 October 2012. 1 December 2015 <http://www.arabnews.com/high-sheep-prices-make-buyers-%E2%80%98ma%E2%80%99ad%E2%80%99>.
  • Tayyan, Anes. Soaring sheep prices in Saudi Arabia as Eid al-Adha approaches. 15 October 2012. 1 December 2015 <http://www.alarabiya.net/articles/2012/10/15/243879.html>