Cyclone devastates Australia's banana crop- Practice IA
Introduction to theory:
Demand and supply are basic economic theories that can help the government and producers make informed decisions like how much to produce, and the price they set for products. Connection to article:
The recent Cyclone Larry has affected crops in Australia, decreasing their supply of bananas drastically, as well as causing a decrease in the employment of workers in the banana industry. Analysis:
Demand is the curve that shows the different amounts of a product consumers want and are able to purchase it within a specific period of time. The supply curve shows the various amounts at which a producer is willing and able to supply at various prices. Equilibrium price can be determined are determined by the intersection of the supply and demand curve. Below shows the market for bananas in Australia before and after the cyclone.
Price of bananas per kilo ($)
Banana market in Australia before(bc) and after cyclone(ac)
Quantity of bananas
Before the cyclone(bc), we can see that prices were much lower at Pbc , and the equilibrium quantity supplied and quantity demanded is relatively higher. Prices were lower as there were many other substitutes of banana like other fruits available, making for a more competitive fruit market in which producers would have to set prices lower in order to attract consumers. Prices are able to be set low as the Quantity supplied(Qbc) is high, enabling producers to lower the total cost of production through economies of scale, such as transporting multiple shipments of bananas with a single ship. Quantity supplied(Qbc) is also relatively high as producers are able to produce at such high volumes due to environmental factors like the crop friendly Australian weather and external factors like the established banana industry. Quantity Demanded(Qbc) is relatively high as bananas are perhaps a...
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