QUESTION 1:
Based on the title of the article “Avocado prices hit record highs with increased demand and scarce supply”, we can see that demand of avocado has upward trend while the supply of avocado has a downward trend
QUESTION 2:
Based on the article, the avocado supply can be support by more avocado orchard which is being set up (Lara Wester, 2016). The supply of avocado is expected to increase significantly over the next few years through marketing campaign (number of seller factor). In addition, the demand for avocados continues to increase as it can be used in the variety of foods (preference factor). Especially, avocado is considered to be unique fruit that no fruit can replace them (number of buyer factor). Therefore, both demand and supply will increase because of these determinants above.
ECON1008: PRINCIPLES OF ECONOMICS Assignment 1 (Qs 1 and 2) Due: 12noon Thursday March 30 Name: Le Phuong Thanh(Lucy) ID Student: 511916 QUESTION 1: Based on the title of the article “Avocado prices hit record highs with increased demand and scarce supply”, we can see that demand of avocado has upward trend while the supply of avocado has a downward trend. As we all know, the change in demand and supply will cause the curve to shift due to non-price factors (price did not change). According to the article, we will see determinants of demand such as preference, the number of buyers while determinants of supply are a number of sellers and weather. (Parkin & Bade n.d.) Firstly, causes of growing demand for avocados are the benefit of avocado for people's health. Avocado is a healthy fruit which is a popular product in supermarket trolleys so, people are becoming more aware of avocado properties (Non-price factor). The demand of avocado is rising significantly every year and it is likely to continue to grow through marketing and healthy campaign (Lara Wester, 2016). Secondly, a reason for decreasing supply of avocados is because of failure harvest process. Supply from West Australia and New Zealand drop to 30% because of weather and Christmas (Non- Price factor) period which influence on avocado's harvest process (Lara Wester, 2016). Diagrams: It can be clearly seen from diagrams above that there are 3 difference cases when supply decrease and demand increase at the same time. An increase in demand will shift the curve to the right while the decrease in supply will shift the curve to the left (Opposite direction). In both 3 cases, the new equilibrium point occurs at the higher price point and the quantity is indeterminate which might no change, increase or decrease. (Parkin & Bade, n.d.). That is the reason why the price will increase due to the equilibrating process. QUESTION 2: Based on the article, the avocado supply can be support by more avocado orchard which is being set up (Lara Wester, 2016). The supply of avocado is expected to increase significantly over the next few years through marketing campaign (number of seller factor). In addition, the demand for avocados continues to increase as it can be used in the variety of foods (preference factor). Especially, avocado is considered to be unique fruit that no fruit can replace them (number of buyer factor). Therefore, both demand and supply will increase because of these determinants above. Diagram: As we can see from the diagram, the diagram shows the change in both demand and supply (same direction). An increase in demand will shift the curve to the right and an increase in supply will shift the curve to the left. The equilibrium equity will always rise but the equilibrium price can increase or decrease which is depend on the change level between supply and demand. In short, the market price can increase or decrease in the future due to the increase in both demand and supply. But if it increases, it can happen oversupply problem. REFERENCES: 1. Parkin, M & Bade, R n.d., Microeconomics, 1st edn, pp. 85-107 2. QLD Country Hour, 2016, “Avocado prices hit record highs with increased demand and scarce supply”, viewed 20 January 2016,
. 1 Principles of Economics (Econ 1008) Digital Image PowerPoint to accompany: Chapter 4 Demand and Supply and Market Equilibrium Alamy/Felix B/Stockimo, (crowd); Fotolia.com/Eky Chan, (texture); Fotolia.com/Stringerphoto, (map) Demand Supply Equilibrium Last Week…………… When you have completed your study of this chapter, you will be able to Explain how demand and supply determine price and quantity in a market, and explain the effects of changes in demand and supply. Market equilibrium MARKET EQUILIBRIUM Market equilibrium occurs when the quantity demanded equals the quantity supplied. At market equilibrium, buyers’ and sellers’ plans are consistent. Equilibrium price is the price at which the quantity demanded equals the quantity supplied. Equilibrium quantity is the quantity bought and sold at the equilibrium price. 4 Bringing both sides together – market equilibrium. MARKET EQUILIBRIUM Market equilibrium at the intersection of the demand curve and the supply curve. The equilibrium price is $1 a bottle. The equilibrium quantity is 10 million bottles a day. 6 Price: A Market’s Regulator; communication device Law of market forces When there is a shortage, the price rises. When there is a surplus, the price falls. Shortage is the quantity demanded exceeds the quantity supplied. Surplus is the quantity supplied exceeds the quantity demanded. 7 The law of market forces is important, so you want your students to grasp why prices are driven to the equilibrium. You can choose a good, like concert tickets to the hottest band. Draw a demand-supply graph with a reasonable equilibrium price and quantity. Ask the students what would happen if the concert promoter decided to charge only $10 a ticket. Would students line up before dawn to buy them? Yes! Explain that this is a case of excess demand. Ask them what could the promoter do to get the crowds to go away? Hopefully they will answer, “Raise ticket prices!” Show them how the market pressures the price to rise to the equilibrium price and use the graph to show how the promoter and students move up their respective supply and demand curves. You can do the same thing for excess supply. Let the promoter try to sell tickets for $1,000 each. Again, move down along the supply and demand curves as the market pressures the price to fall. Shortage (Excess demand) At 75 cents a bottle: Quantity demanded is 11 million bottles. Quantity supplied is 9 million bottles. There is a shortage of 2 million bottles. 8 Movement toward equilibrium At 75 cents a bottle: Price rises until the shortage is eliminated and the market is in equilibrium. This occurs at $1.00 per bottle 9 Occurs when the quantity demanded exceeds the quantity supplied at the current price. Competition amongst buyers and a desire to supply more by suppliers eventually bids up the price and results in a new equilibrium. Shortage (Excess Demand) 4.10 10 Surplus (Excess supply) At $1.50 a bottle: Quantity supplied is 11 million bottles. Quantity demanded is 9 million bottles. There is a surplus of 2 million bottles. 11 The magic of market equilibrium and the forces that bring it about and keep the market there need to be demonstrated with the basic diagram, with intuition, and, if you’ve got the time, with hard evidence in the form of further class activity. If you did the demand experiment, you might want to begin with that and explain that in the classroom market, the supply was fixed (so there was vertical supply curve) at the quantity of bottles that you brought to class. The equilibrium occurred where the market demand curve (demand by the students) intersected your supply curve. Then, if you did the supply experiment, you can explain that in that classroom market, demand was fixed (so there was a vertical demand curve) at the quantity that you had decided to buy. The equilibrium occurred where the market supply curve (supply by the students) intersected your demand curve. Point out that the trades you made in your classroom economy made buyers and sellers better off. If you want to devote a class to equilibrium and the gains from trade in a market, you might want to run a double oral auction. There are lots of descriptions of these and one of the best is at Charlie Holt’s http://veconlab.econ.virginia.edu/admin.htm Movement toward equilibirum At $1.50 a bottle: Price falls until the surplus is eliminated and the market is in equilibrium. This occurs at $1.00 per bottle 12 Occurs when the quantity supplied exceeds the quantity demanded at the current price. Competition amongst producers and a desire to buy more by consumers eventually causes the price to decline until a new equilibrium is reached. Surplus (Excess Supply) 13 Changes or shifts will disrupt the equilibrium. The market will adjust until equilibrium is reached again. The equilibrium price and quantity traded will change. Changes in Supply and Demand 14 Predicting Price and Quantity Changes We can work out the effects of an event by answering: Does the event change demand or supply? Does the event increase or decrease demand or supply—shift the demand curve or the supply curve rightward or leftward? What are the new equilibrium price and equilibrium quantity and how have they changed? 15 The whole chapter builds up to using the demand/supply model to predict changes in the equilibrium price and quantity. Students are too ready to guess the consequences of events that change either demand, or supply or both. They must be encouraged to work out the answer and draw the diagram. Encourage the students to break all exercises about the effects of events in a market into three questions: Question 1 Does the event change demand, supply, both, or neither? Question 2 Does the event increase or decrease demand or supply—shift the demand curve or the supply curve rightward or leftward? Question 3 What are the new equilibrium price and equilibrium quantity and how have they changed? Proceed in five steps: Step 1 Draw a demand-supply graph and label the axes with the price and quantity of the good or service in question. Step 2 Think about the event or events and answer Question 1: does it change demand, supply, both or neither. Step 3 Think about the event or events and answer Question 2: what is the direction of change? Step 4 Draw the new demand curve and supply curve on the diagram. Step 5 Look at the diagram and answer Question 3: how have the price and quantity changed? Walk the students through the steps and have one or two students work some examples in front of the class. Effects of Changes in Demand Example 1: Event: A new study says that tap water is unsafe. In the market for bottled water: With tap water unsafe, demand for bottled water changes. (tap water