Tuesday, February 15, 2011

Good news...You DON'T have to eat your veggies! Why? Because there aren't any...

Well, there are veggies, but a shortage is developing because of bad weather in the last few weeks in several Southern states.  Get ready to pay more or hear "Do you want tomatoes on that?"...

Freeze Hits Vegetables:  Suppliers Scramble Following Cold in Mexico, Florida, Texas.

""A major freeze in Mexico earlier this month has resulted in a shortage across the U.S. of tomatoes, cucumbers, bell peppers and other produce that could last until April and lead to higher prices at the grocery store.
Supermarkets, distributors and restaurant chains are scrambling to find other sources for the items and to offer replacements. But the problem has been compounded by the fact that inclement weather has also hit other growing regions, like Florida and Texas, that would normally be able to make up for a supply interruption from Mexico...""

 In equilibrium before the bad weather, the Market for Vegetables looked like this:
I use a price of $1.00 for the various vegetables and a market quantity of 100 for simplicity. Because bad weather has destroyed alot of the harvest, the supply of vegetables is negatively impacted. Shown in the next few graphs, there will be a decrease in quantity supplied of vegetables at every price RELATIVE to supply curve  "SUPPLY*".
If we connect these new price and quantity supplied  combinations, we derive a new supply curve, "SUPPLY 1" that lies to the LEFT of "SUPPLY*".  ONLY one of these price and quantity supplied combinations intersect "DEMAND*" and that is at Point "C". 
The market price increases to $1.25 as the market quantity decreases to 88.

The article suggests this situation will persist at least until April.  Until then restaurants will either have to charge MORE for foods that contain, say, tomatoes OR ration the tomatoes to customers who request them.

Look to see if this happens to you in the near future.  Because you are now more informed, you will know the source of this problem.  Amaze your friends with your inside economic knowledge!!
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