The Sriracha Shortage
By

ECO/365
January 20, 2014
Ron Merchant

The Sriracha Shortage Huy Fong Foods, the maker of Sriracha sauce, the hugely popular hot sauce, has had a couple of setbacks inhibiting the production and distribution of their sauce. On November 26, 2013 a court ordered Huy Fong foods to stop producing their sauce due to the pungent smell emitted by the plant. Subsequent to that new food regulations required that sauces such as Sriracha be held 35 days before distribution. This paper intends to answer the questions of utility as it relates to this product. As well as reasons for change in demand when supply remains unchanged, and reasons for a change in supply when demand stays the same. Finally, to assess the elastic or inelasticity of this product (Nicholson, 2013).
Utility
First the utility of Sriracha sauce is held very high among its followers. Individuals to restaurants alike, people love this spicy sauce over many other hot sauces currently on the market. People put it on everything, restaurants like it because it has an indefinite shelf life. Business Week reported in February of last year that Sriracha was second only to Tabasco in terms of taste. Sales of Sriracha have catapulted Huy Fong Foods from its meager beginnings in the 1980’s to a 20 million unit seller of Sriracha in 2013( BusinessWeek, 2013).
A change in Demand To explain a change in demand when supply has remained unchanged requires the reader to understand both laws as they apply to economics. The Law of Demand states that as prices fall on a particular good the demand for that good will rise. As well, the Law of Supply states that as the price rises the supply of the item will also rise (Colander, 2010). In the weeks leading up to the factory shutdown news of product scarcity leaked and consumers began to anticipate running out of their favorite