Article Analysis

PART A: ARTICLE ANALYSIS

Question 1

1a. According to this article, explain which non-price factor(s) might affect the world market for bananas (explain which non-price factor(s) causes which curve(s) to shift, whether this creates a surplus or shortage, and what will happen to the equilibrium price and quantity).

The non-price factor which causes the supply curve to shift:

• Change in number of sellers/firms – due to the infected bananas, suppliers will not have any bananas to supply. This reduces the number of sellers selling bananas. Thereby, the supply of bananas reduces.

The decrease in supply will cause the supply curve shift to the left. Since the supply is less than the demand, a shortage is created. The equilibrium price increases, whereas the quantity decreases.

1b.   Draw a demand/supply diagram to show how your answer in question 1a will affect the world market for bananas (draw a fully-labeled diagram only, no explanation is needed for this question).

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1c.  Explain what may happen to the Latin American market for bananas assuming the disease continues to spread in other parts of the world (explain which non-price factor(s) causes which curve(s) to shift, whether this creates a surplus or shortage, and what will happen to the equilibrium price and quantity).  

The non-price factor which causes the demand of the Latin American banana’s to shift:

• Population – the disease has infected banana plants around the World. Since bananas in Latin America have not been affected, there will be a demand for these bananas coming from around the world. Here, the number of buyers or, simply, the population increases. Therefore the demand, too, increases.

The demand shifts the demand curve to the right. Due to the excess demand, a shortage is created. Both the equilibrium price and the quantity will increase drastically.

Question 2

2a.  According to this article, explain which non-price factor(s) might affect the US market for propane (explain which non-price factor(s) causes which curve(s) to shift, whether this creates a surplus or shortage, and what will happen to the equilibrium price and quantity).  

The non-price factors which cause the demand curve to shift:

• Weather –Because of the change in weather (due to the polar vortex) people will need to stay warm by fueling furnaces, water heaters, etc. This increases the usage of propane. Therefore a higher demand for propane is created.

Due to this higher demand, the demand curve will shift to the right. Since the demand for propane is more than the supply, a shortage is created. Both the equilibrium price and quantity will increase.

• A change in expected future prices – In the future, the price of propane is expected to rise. Therefore, people will try to buy as much propane as possible before the prices increase. As a result there will be a higher demand for propane.

This shifts the demand curve significantly to the right. Since the demand is higher than the supply, a shortage is created. Both the equilibrium price and the quantity increases.

2b.  Explain how this change in the propane price might affect the market for farm crops (explain which non-price factor(s) causes which curve(s) to shift, whether this creates a surplus or shortage, and what will happen to the equilibrium price and quantity)