Vegetable prices likely to fall - Article Example

Download file to see previous pages 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, where the needs of customers and suppliers are met - optimal resource allocation, and that markets naturally strive for it (graph 1).4 “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). “Growers whose crops have not been destroyed have had difficulty transporting their products to market because of flooded roads and rail lines. “6 This inability to sell their goods also affects the prices, as it affects supply curve even more. The demand curve did not move, therefore with the price going up the quantity demanded decreased. As Queensland have been responsible for big part of Australia’s fruit and vegetable supply, the aggregate supply curves also changed drastically. However, the article indicates that it all goes for the better as the prices are predicted to lower. “In a quirky turn-around, southern growers hearing sustained media reports of floods and cyclones in Queensland have planted extra crops of leafy vegetables such as lettuce, broccoli and cauliflower.”7 These decisions will shift the supply curve to the right, and a possibility of reaching the original equilibrium price level appears. ...Download file to see next pagesRead More