Economic100 Article Analysis Example | Topics and Well Written Essays - 1250 words

Economic100 Analysis - Article Example Broccoli, which was yesterday priced at $6.99/kg in store, could drop down to as low as $2.99/kg. Other winter vegetables, such as cauliflower and cabbage, will see similar reductions. Fruit would eventually follow, but would not drop as much, he said. Banana lovers will be the hardest hit however. â€Å"They will stay up for at least six months,† he said. Ausveg, the national peak industry body representing the interests of Australian vegetable and potato growers, has also predicted the drop in vegetable prices. â€Å"We’ve predicted a price drop in the coming months. We will see a return to normal pricing,† Ausveg spokesman Hugh Tobin said. â€Å"Areas devastated by the floods like the Lockyer Valley are getting back on track.† Ausveg had estimated national losses in vegetable and fruit production was at approximately $225 million. Price drop Winter vegetables such as broccoli, cauliflower and cabbage are expected to drop in price by almost 50% in the ne xt two to three months. Fruit will slowly follow, depending on the weather, but bananas will not return to normal prices for at least six months.1 Report Introduction The price level of food products influences majority of each household’s expenditure, therefore changes in prices draw people’s attention. ... It also mentions fruits following sometime later, without being exact. It is expressing pessimistic predictions about banana’s specifically, affected by Yasi cyclone, estimating the recovery process to last at least 6 months. The national wealth suffered a terrible loss due to the flooding, and the article estimates $225 million loss in production. However, these estimates do not take into account the future consequences of losing the foreign market share. The reasons for prices being up for a long period of time and their estimated changes are hidden within laws of demand and supply. The elasticity of demand also influences the situation, and the purpose of the report is to give reasons for this thesis. There’s a high possibility of inflation affecting the situation further, and that will be also discussed. Analysis The law of supply and demand states that all other things constant, there exists an equilibrium point on the intersection of supply and demand curves, wher e the needs of customers and suppliers are met - optimal resource allocation, and that markets naturally strive for it (graph 1).4 Graph 1. Supply and demand equilibrium. Source: Investopedia. â€Å"The floods have damaged crops and caused disruption to supply.†5 What happened in Australia, with natural disasters – flood and cyclone – affecting available sources of goods, is called a supply shock. As the amount of fruits and vegetables supplied decreased, the supply curve shifted left, and the corresponding equilibrium price increased (graphs 2 and 3). â€Å"Growers whose crops have not been destroyed have had difficulty transporting their products to market