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Econ problem

  1. Feb 14, 2008 #1
    A freeze in southwestern U.S. and Mexican fields has resulted in damaged crops and inflated prices for imported produce such as lettuce, broccoli and cauliflower.

    Describe how this would be interpreted on a supply and demand diagram. Do not draw graph.

    *Please include one(if you can) so I can have a better understanding. =)
     
  2. jcsd
  3. Feb 14, 2008 #2
    Draw a graph indicating what you think would happen (then describe it a bit). I can check over it for you to make sure it's correct.
     
  4. Feb 14, 2008 #3

    EnumaElish

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    Break it into steps:
    1. Freeze ---> crop failure: what happens to either demand (D) or supply (S)?
    2. Describe how what happened to D or S results in higher price.
    3. Describe why importers find it profitable to sell in the U.S. although they did not find it profitable before the freeze (e.g. last year, when there wasn't a freeze).

    [I am not sure the following is part of the hypothetical, you may want to think about it:]
    4. What happens to either of D or S if, as a result of all of the above, French farmers plant fast-growing lettuce, broccoli and cauliflower and import them to the U.S.?
     
  5. Feb 14, 2008 #4
    1. Price and revenue will decrease(therefore inelastic)
    2. Less supply therefore higher demand which results in higer price (D and S will shift to the left)
    3.Higher demand, I think....
    *less is supplied at every price
     
  6. Feb 14, 2008 #5

    EnumaElish

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    You aren't following the logical steps. Start with my question 1:

    EnumaElish question 1: Freeze ---> crop failure: what happens to either demand (D) or supply (S)?
    jalen answer 1: the demand curve __________. Or: the supply curve _________. [Hint: it's either the demand or the supply that shifts, not both. Which do you think will shift, demand or supply?]

    EnumaElish question 2: Describe how what happened to D or S results in higher price.
    jalen answer 2: Since the demand curve __________ (or the supply curve _________), the equilibrium price increased.

    EE question 3: Describe why importers find it profitable to sell in the U.S.
    jalen answer 3: Since the price increased, importers find it profitable to sell in the U.S. although they did not want to sell it at a lower price before the freeze.

    Listen to Economist and draw a demand & supply diagram. Move one of the curves as in jalen answer 1. (The result should be an increase in equilibrium price.)
     
    Last edited: Feb 14, 2008
  7. Feb 14, 2008 #6
    jalen answer 1: the demand curve shifts to the right

    jalen answer 2: Since the demand curve increases, the equilibrium price increased.

    I'm not sure how to include a graph so I'll explain how it's suppose to look like. The supply will remain the same and the demand will shift to the right resulting in a new equilibrium price. I hope I explained it the way I pictured it to be...
     
    Last edited: Feb 14, 2008
  8. Feb 15, 2008 #7

    EnumaElish

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    A right-shift in demand means that at a given price, more quantity will be demanded after the freeze than before the freeze. Can you explain why? [Are you sure that this is the right answer?]
    What does a point on the supply curve mean? Pick any point on the supply curve, say (qs1, p1) and tell me what qs1 means in relation to p1.

    Then do this on a demand curve. Pick any point on the demand curve, say (qd1, p1). What does qs1 mean in relation to p1?
     
  9. Feb 15, 2008 #8
    1)the supply decrease due to the bad weather therefore shift to the left
    b)the price increase

    I'm not sure if this is relevant but...quantity demanded decreases*
     
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