Monday, August 31, 2009

Test your understanding of economics in the news: Is this a change in supply or a change in demand?

The article "Texas Cattlemen v. Oprah Winfrey" provides a summary of the 1998 trial in which Texas cattlemen sued Oprah Winfrey for causing them financial harm in 1996. Was the decrease in the price of beef after the airing of Oprah's television show caused by (a) an increase in the supply of beef, (b) a decrease in the supply of beef, (c) an increase in the demand for beef, or (d) a decrease in the demand for beef?

Read the article below and then illustrate this price change with a graph that shows the initial positions of the supply and demand for beef and the new positions of the supply and demand curves. (Hint: Only one of the curves has shifted.) There is a link at the bottom of this posting that provides the answer.
Significance: The ruling in this case reaffirmed the right of a person to freely speak his or her opinion without fear of prosecution. Also, it was determined that beef does not qualify as perishable food under the Texas False Defamation of Perishable Food Products law. (The law is commonly known as the "veggie libel" law.)
Oprah Winfrey's talk show has covered many controversial topics since her national television debut in 1984. "Dangerous Foods" aired on April 16, 1996, and focused, among other things, on the potential risk of contracting "Mad Cow" disease in America.

This was prompted in part by a recurrence of the disease in Europe, where it had previously manifested in the 1980's. Howard Lymans, a vegetarian activist, said there was a high potential for contracting of the disease, because cattlemen routinely feed ground animal parts to cattle. Winfrey, upon hearing this, declared the information "Stopped (her) cold from eating another burger."

Beef prices fell after the show's airing, and did not rise again for two weeks. Texas rancher Paul Engler was displeased with the statement and the show and deemed the statement "incorrect" and "negative." He claimed to have lost seven million dollars after the show aired. Engler and several other cattlemen claimed a collective loss of more than $12 million under the Texas law which holds people liable for falsely disparaging food products. The federal lawsuit is regarded as the biggest test to date of the so-called "veggie libel" laws. It was determined that the farmers didn't have a case under the "veggie libel" law, so the case was decided solely on the business disparagement law. This required them to prove that Oprah had acted with actual malice.

On February 26, 1998, almost two months after the trial began, the jury decided the case in favor of Oprah Winfrey. They determined that her statements did not constitute libel against the cattlemen. After the trial Winfrey said, "FREE SPEECH NOT ONLY LIVES, IT ROCKS!" The Texas Cattlemen's Association is appealing the verdict.


If you have an interest in reading more about this incident, here are some other accounts:

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