Question

I am blessed to have an animal companion by the name of Clio. She’s an all black cat 1 that I acquired at the Yellowstone Valley Animal Shelter (YVAS) and she makes my life far more interesting and amusing than it would be without her. The shelter is interesting in that they both charge far less to adopt a pet than they spend in vaccinations/spaying/neutering and that they make up the difference by asking for donations. In counterpoint to the YVAS, there are numerous commercial operations (often termed "puppy mills" or something similarly pejorative) that charge close to the market clearing price...though even there they often charge less than they might be able to get. See how far you can get in understanding YVAS (and other shelters’) behavior by:

a. Diagraming this market.
b. Explaining why YVAS doesn’t charge a market clearing price despite there being no legislation keeping them from doing so.
c. Assessing whether pets should go to the highest bidder.

Answer 1

a. Diagraming this market:The diagram for the market is shown below:It is assumed that YVAS (Yellowstone Valley Animal Shelter) is currently operating at point A. This point shows that the shelter is charging a lower price than the market clearing price (Pm), which is represented by the intersection of the supply and demand curves. At point A, the quantity demanded (Qd) of pets is more than the quantity supplied (Qs), which suggests that there is excess demand in the market.b. Explaining why YVAS doesn’t charge a market clearing price despite there being no legislation keeping them from doing so:One reason why YVAS doesn’t charge a market clearing price despite no legislation keeping them from doing so is that they operate as a nonprofit organization whose aim is to help animals. Thus, their main goal is not to maximize profits, but to provide services to the community. Moreover, since they have a limited budget, they rely on donations from individuals to cover their costs. Hence, they charge a lower price than the market price to make it affordable for people to adopt pets and hope that they would donate additional funds to help the shelter's operations.c. Assessing whether pets should go to the highest bidder:No, pets should not be sold to the highest bidder because doing so would mean that those who have more money will have a better chance of acquiring pets. This would be unfair for people who have less income. Moreover, selling pets to the highest bidder may also mean that the pets may not be cared for as well as they should be since the highest bidder may not necessarily be the best caregiver for the animal. Therefore, it is better to have a system where pets are sold at a fair price to anyone who is willing and able to provide a good home for the animal.