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Thursday, March 7, 2019

Cyclone Devastates Australia’s Banana Crop Essay

Cyclone Larry destroyed approximately $300 worth bananas crop which is 90% of the return at Queensland. The resignation in supply and un salmagundid demand testament result in a shift of the supply curve to the left hand resulting in an affix of the balance hurt. The demand exiting stay the same(p) however there might be a slight fall in the demand at a later stage collect to increased scathes provided in the short run demand dust same. A fall sharp in supply authority sum supplied provide be slight than the bill demanded of bananas leading to an increase in expense as shown in the graph downstairs.The graph shows the original standard demanded (D) and supplied (S) with the intersection as the market place residuum at scathe P1 and bar Q1, the inward shift of the supply curve to the left with new measure supplied after the cyclone with a new intersection point representing increased market equilibrium at bell P and quantity Q. 2a. Determinants of bell cra ck of bananas The following be some of the factors that affect the elasticity of demand for bananas replaceability Since bananas ingest a large number of substitutes like other fruits, it is inflexible in demand.Proportion of income charge elasticity of low priced goods like bananas is low. This means that the demand for bananas grow slowly as income increases as it is very smallish proportion of the total income earned. Necessity The greater the good is considered a luxury the more elastic it is. Banana is a necessity and is therefore nonresilient in nature. Time Consumers need time to adjust to changes in price. In the short run there will no change in demand for bananas but in the long run, consumers might reduce their purchases and shift key to other substitutes. 2b.Price Elasticity of Demand before and after Cyclone Larry Cyclone Larry will result in a change in price and a change in the quantity demanded. The price elasticity of demand dissolve be calculated as follow s Price elasticity of demand = contribution change in quantity demanded Percentage change in price Change in price and quantity will not change the percentage change in either the price or the quantity. barely quantity demanded in units and price demanded in dollars will be changed. This will not change the price elasticity of demand. 2c. Impact on westside Australian Producers RevenueThere will be a shortage in the market for bananas due to the cyclone and so entirely West Australian production which comprises of 5% of the total production will be available in the market. No import of bananas is allowed due to biosecurity risks. Since bananas are inelastic in nature the change in quantity demanded is less responsive to changes in price. Total revenue (quantity demanded*price) of West Australian producers revenue will increase. A good year laughingstock reduce farm income as the quantity demanded remains same, supply increases and so the price goes down. 3a. Government Interve ntionGovernments mostly put minimum price nucleotides and restrict imports of agricultural products to support the farmers. Since the elasticity of these products is low, an increase in price raises the total revenue of the farmers. A good bumper year results in an increase in the quantity demanded which leads to a fall in price thence a fall in the revenue earned by farmers. A fall in the production of agricultural products will increase price and therefore the revenue for the West Australian farmers. Farmers in Queensland will their small(a) production at high prices. The government fuel intervene by either setting price ceiling or ditch.Price crown A price ceiling means that the price of bananas cannot exceed the upper limit price set by the government. A price ceiling to a higher place the equilibrium price will have no marrow, since equilibrium can be attained. A price ceiling at a lower place the new equilibrium will be effective. But it will not be serious for farme rs as they will be forced to sell at or below the maximum price ceiling. This will result in surplusage demand. The graph below shows the effect of establishing a price ceiling below the market price. Price Floor A minimum price floor means that the banana growers cannot sell at a price below the price set by the government.Bananas will be sell at or above the minimum price established. A price floor that is set at or below equilibrium has no effect because equilibrium can be attained. However, if the price floor is set above equilibrium price, it will be effective. This will be beneficial for the growers but not for the consumers. There will be an excess supply. The following graph shows establishment of a price floor above the market price. 3b. Consequences of Price Floor As shown in the graph above a price floor will result in higher prices. This will be profitable for the banana growers but not for the consumers.In this case the quantity supplied will exceed quantity demanded. The excess demand will have to be taken care of. The government will have to tonus in and buy the excess quantity supplied and either store it in the warehouse which will not be feasible since banana is a perishable good or dispose it off. 3c. Should the Government Intervention be supported? The government can step in and subsidize bananas and serve well the unemployed workers by finding an alternate job for the seven months coin bank new banana crops grow. A price ceiling above the equilibrium should not be supported as it will create the possible for black market.Banana will be bought at the controlled price and sold at the market price. The government can support a price floor which would result in excess supply which can be bought by the government and sold at a lower price. References Samuelson A. , Nordhaus D. (1989). Economics. McGraw-Hill http//www. smh. com. au/news/national/thousands-of-jobs-gone-with bananas/2006/03/20/1142703270076. html Illustrations www. netmba. co m/econ/micro/demand/elasticity/price http//www. smh. com. au/news/national/thousands-of-jobs-gone-with bananas/2006/03/20/1142703270076. html

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