Wednesday, April 16, 2014

Supply and Demand Lesson: Fruit and Vegetable Edition. Salad bars are about to become more expensive.

This graphic, from the Wall Street Journal, shows how the prices of various fruits and vegetables are expected to rise in the near future due to drought conditions in California.  The salad bar at your favorite restaurant is likely to be more expensive very soon.
Source: Wall Street Journal
While not a good turn of events for the marketplace, it does provide this economics teacher the opportunity to illustrate supply and demand with graphs.  So, for your learning pleasure I created a set of slides that tell the above story.
"California is the largest domestic producer of each of the products Mr. Richards identified, ranging from grapes to peppers. And in the case of avocados, it’s the only state with a significant crop.The drought has wiped out between 10% and 20% of California crops for the eight items, but the size of the expected price increases varies widely. Lettuce prices could jump as much as 34% and avocado prices could rise 28%, the largest projected increases. 
“People are the least price-sensitive when it comes to those items, and they’re willing to pay what it takes to get them,” Mr. Richards said. “It’s hard to make a salad without lettuce.”In basic economic terms, the drought reduces supply, which puts upward pressure on prices. But how high the price can rise is determined by consumers’ willingness to pay more against their ability to find a substitute".-(Wall Street Journal)

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