Wednesday, April 23, 2014

Price of Limes--Part 3. Are "Large Limes" and "Organic Limes" perfect substitutes for each other? And what is up with the pricing?

I guess limes have been my obsession lately.  Intrigued how Mexican criminal cartels are having an influence on the price of them.  Does not seem to be very "gang-like" to answer the question "What are you in for?" and have to admit you are in the illicit lime trade.

Well, anyway, I noticed this today. Organic limes are $1.29 and regular limes are $1.49.  Both within sight of each other. Both similar in size (I did a side by side comparison).

Usually the price differential is the other way around.

Oh, well.  Here is your brief Microeconomics lesson:

The "Substitution Effect" prompts movement up and to the LEFT along the Demand Curve for Large Limes as the Quantity Demanded decreases at $1.49 and the availability of a Substitute (Organic Limes) shifts the Demand Curve of Organic Limes to the RIGHT--at some price ($1.29) the Quantity Demanded is greater than it was before.

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