Alpacas were once a curiosity seen virtually only in a zoo. Times have changed. They are now being farmed for their wool. In 1990 there were 1,330 registered alpacas; in July 2000 there were 29,856. the number of owners has expanded from 146 in 1991 to 2,919 today. Alpacas are "easy keepers', being well-mannered and requiring minimal food, water, shelter, and care. Their hardiness results from their ancestry in the Andes mountains. They live 15 to 25 years.Source: Glenn Collins, "Soft, Gentle, Cute, Lucrative and New on the Farm," The New York Times, August 11, 2000.
Alpaca fleeces are silky, durable, insulative, and water-resistant. They may be used
to make sweaters, for example. Fleece sells for $2 to $8 an ounce, depending on color and quality. Each alpaca produces five to eight pounds of fleece a year. A sweater requires about a pound of wool. It may sell for $400 although the yarn may cost only $40 and the labor $100.Since alpacas reproduce at a slow rate and importing is tightly restricted, some herd
owners breed alpacas for resale. Females yield $12,500 to $40,000, while herd sires
have sold for as much as $165,000. Stud fees can be $2,000 to $5,000 for prize bulls. Some farmers are vertically integrated - they breed alpacas, farm their wool, and make alpaca clothes.
1. Draw a graph showing growth in the alpaca
market from 1990 to 2000.
2. If a sweater producer sells an alpaca
wool sweater for $400 and the yarn and labor used to produce the sweater
are $40 and $100 respectively, what is the normal profit of this sweater
producer?
3. What if a new technology to produce sweaters
was invented that only used $30 of wool and $80 of labor, how would the
market for alpaca sweaters change – show using a graph.
4. Finally, what if it is found that alpaca
wool mittens are all the rage and that the price of mittens (using only
half as much yarn as a sweater and the same amount of labor) is $400 a
pair. What would that do to the market for alpaca sweaters?
Show using a graph.