Banana Prices Case Study
Topic a) Banana Prices in QLD
Increase in banana prices will lead to fall in demand and moves the point on the demand curve to the left. However, supply will increase as it will beneficial to suppliers to provide = bananas at a higher price. But to regain equilibrium there should be a reduction in supply that will shift the supply curve upwards.
Topic b) Green Tea Market in China
Due to low prices for this particular tea in the previous years, the amount of land set aside for growing the tea in Hangzhou, Zhejiang in the current season had been halved. Therefore this would lead to decrease in supply. As well, some scientific research indicated that this particular green tea is an effective …show more content…
Among these factors the change in the price of the good changes the quantity demanded and represents the good for movement along the demand curve. The changes in other factors change the demand for each price and represent the shift in demand curve.
The supply for good is the direct relationship between price and quantity. The graphical relationship between price and quantity supplied is depicted by the supply curve. Any point on the supply curve shows the quantity producers supply for any particular price.
The supply for good depends on various factors such as; own price, price of related goods, cost of the production, and numbers of sellers in the market. Among these factors the change in the price of the good changes the quantity supplied and represents movement along the supply curve. The changes in other factors change the supply for each price and represent the shift in supply curve.
The figure below gives the market for green tea in …show more content…
The announcement that the tea has certain positive health effect increases the demand for good. However, the effect of change in demand and supply on equilibrium price and quantity is ambiguous and depends on magnitude of the shift of the demand and supply curve. There can be three cases:
1. The increase in demand is less than the decrease in supply
2. The increase in demand is equal to the decrease in supply.
3. The increase in demand is more than the decrease in supply.
As shown in the figure 1 above, initially the market was at equilibrium E1 with demand D1 and supply S1. The equilibrium price was P1 and quantity was Q1. The decrease in supply moves the economy to a new supply curve S2.
1. In case the increase in demand is less than decrease in supply, the demand shifted to D2. The economy moves to E2. At E2, the price increases to P2 and quantity demanded decreases to Q2.
2. In case the increase in demand is equals to decrease in supply, the demand shifted to D3. The economy moves to E3. At E3, the price increases to P3 and quantity demanded remains unchanged to