University of South Australia - Principle of Economic Applied Writing
UNIVERSITY OF SOUTH AUSTRALIA Principle of economic – assignment 2
Prepared by Donald Mak
The price of fruit and vegetables keep rising recently. According to Todd (2011), popular salad and fresh juice have removed from the menus due to the rise of fruit and vegetable price after the Queensland flood. The research showed that price of pumpkin has tripled from $1.5 to $6 and price of pineapple have increased from $28 a box to $56 a box. (Todd 2011) Regarding to this issue, the Australian government can either lift the import ban or impose a price ceiling to keep the fruit and vegetable prices in a socially acceptable level.
An increase of the price and decrease of the quantity demanded of food and vegetable were caused by the flood in Australia. Due to the flood in Queensland, many food and vegetables were destroyed. It is no doubt that the supply of food and vegetables will decrease.
From diagram (1), in short-term, we will find that supply curve has shifted leftward from S1 to S2 as there is a decrease in supply. With the decrease of supply, equilibrium price will goes up from Pe to P2 and the equilibrium quantity will decline from Qe to Q2. At this stage, a shortage will appear in Q3Qe. Shortage usually occurs when the quantity demanded exceeds the quantity supplied at the current price. There will be competition amongst buyers and they will eventually bids up the price and results in a new equilibrium. When there is a shortage in the market, black market may exist and rationing problem might occur.
When there is a technological breakthrough which can ensure the imported pumpkins are as good as domestic qualities and are allowed to be imported into Australia, it will definitely increase the supply and improve the shortage problem in short term.
From diagram (2ai), with the improvement of the technology as well as the lifting of import ban, the supply has increased and the supply curve has shift to the right. A new supply curve S1 has
Prepared by Donald Mak
The price of fruit and vegetables keep rising recently. According to Todd (2011), popular salad and fresh juice have removed from the menus due to the rise of fruit and vegetable price after the Queensland flood. The research showed that price of pumpkin has tripled from $1.5 to $6 and price of pineapple have increased from $28 a box to $56 a box. (Todd 2011) Regarding to this issue, the Australian government can either lift the import ban or impose a price ceiling to keep the fruit and vegetable prices in a socially acceptable level.
An increase of the price and decrease of the quantity demanded of food and vegetable were caused by the flood in Australia. Due to the flood in Queensland, many food and vegetables were destroyed. It is no doubt that the supply of food and vegetables will decrease.
From diagram (1), in short-term, we will find that supply curve has shifted leftward from S1 to S2 as there is a decrease in supply. With the decrease of supply, equilibrium price will goes up from Pe to P2 and the equilibrium quantity will decline from Qe to Q2. At this stage, a shortage will appear in Q3Qe. Shortage usually occurs when the quantity demanded exceeds the quantity supplied at the current price. There will be competition amongst buyers and they will eventually bids up the price and results in a new equilibrium. When there is a shortage in the market, black market may exist and rationing problem might occur.
When there is a technological breakthrough which can ensure the imported pumpkins are as good as domestic qualities and are allowed to be imported into Australia, it will definitely increase the supply and improve the shortage problem in short term.
From diagram (2ai), with the improvement of the technology as well as the lifting of import ban, the supply has increased and the supply curve has shift to the right. A new supply curve S1 has