Economics Avocados

Article from [pic 1]

http://www.therakyatpost.com/business/2016/02/22/output-shortage-driving-up-aussie-avocado-price/#up

The article is focused on the increase in demand and shortage of supply of avocados which has been forced on the Australian consumers. Supply is defined as various quantities of a good that firms are willing and able to produce and sell at different possible prices. The demand of a good is defined as the various quantities of a good which consumers are willing and able to buy at different possible prices. In this case, due to the “hostile weather, strict quarantine laws and Christmas binge” the demand and supply of avocados in Australia has altered. As stated in the article: “Outside South and Central America, where the fruit is native, Australia has the highest per-capita consumption in the world” which means the current shortage in supply leaves many consumers unsatisfied as the demand for avocados in Australia is ‘fetching a king’s ransom’. The extension in demand of avocados is caused the good being popular during the summer and Christmas, which is a period of time that consumption this scarce good tends to incresase.

Diagram showing decrease in supply for the market of avocados in Australia.

[pic 2]

The diagram shows how the “hostile weather, strict quarantine laws and Christmas binge” have affected the demand and supply of avocados. As shown in the diagram, the supply curve has shifted leftward causing a new equilibrium price and quantity for the market of avocados (shown by EQ1 and EQ2). The shift in the supply curve determines that, for any given price, less quantity is supplied (seen by the decrease from Q1 to Q2). Consequently, this creates a shortage of supply at the initial equilibrium quantity of avocados in Australia. As an effect, this puts pressure on the producers of avocados to increase the price, and so the producers do.

As a result of the decrease in supply, the price of avocados has increased from P1 to P2 which in reality has caused consumers “paying through the roof,”. The article reports “That has sent the price as high as A$7 (RM21) per fruit, compared with just under US$1 in USA and around £1 in Britain”. Therefore this article suggests other countries such as USA and Britain are not suffering from the same supply decreasing conditions.

An external factor, which must be taken into account in order to evaluate the reduced supply of avocados in Australia, which is also not prevalent in the market of avocados for Britain and USA are the additional strict quarantine laws which prevent imports of avocados from other countries. Though the consumers are protected from pesticides and bacteria living on the imported avocados, consumer expenditure has increased while the quantity supplied has decreased as a result of reduced crop yield (due to the “hostile weather”).