New Zealand (where I am from) is mainly an agricultural economy and the big news right now is high prices for dairy products, boosted by increased demand due to economic growth in Asia. As people get richer, it seems they like to eat cheese and drink milk. Naturally this is making consumers in New Zealand unhappy, as the domestic price for these products pretty much equals the world price. As this news story relates, people are responding by buying less dairy products. Demand slopes down …

I also heard from my spies in rural New Zeland that farmers are responding to these higher prices and sheep are disappearing from vast areas of land and being replaced by cows. Some big new dairy processing plants are being constructed too. Supply slopes up …

As an economist, I feel a warm fuzzy glow to hear this news … people respond to prices, which affects both consumption patterns and resource allocation, and this ensures efficient use of scarce resources. It doesn’t always make everyone happy (consumers are unhappy; farmers are happy), but a price’s job isn’t to make you happy, it’s to give you information.