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Fuit, veg costs surge

The Queensland horticulture industry is crucial in Australia’s food chain link. Queensland is the leading producer of fresh produce such as fruits and vegetables in Australia whereby it supplies about 28% of horticulture produce. The recent Queensland flooding, which, affected about 14% of the nation’s fruit and vegetables produce areas affected the Australia’s supply of fruits and vegetables. The consistent rainfalls and the subsequent Queensland flooding damaged and disrupted harvests for horticulture especially, fruits and vegetables such as pumpkins, tomatoes, capsicum, celery, avocados, lettuce, broccoli, potatoes, mangoes, bananas, melons grapes and seedless watermelons.

This reduction in produce of fruits and vegetables has affected the horticulture industry economy negatively making it decline by 10% overall for 2011 leading to a combined loss of $560 million. The shortages of fresh fruits and vegetables have made the prize of the products to go high. This has led to small business owners to quit from preparing and selling popular salads and fresh fruit juices. An interview with sumo salad Charlestown square and Westfield kotare owner Mr. Paul Phelan said that he had been forced to substitute ingredients in some popular salads because of the problems he encounters with supply. He further said that it was difficult for him and other business colleagues to find pumpkin and cos lettuce and if they found one, it was of the poorest quality and very expensive. The price of pumpkin had tripled due to the floods from $1.5 to $6 a kilo and of bad quality.

Summarily, Paul highlighted that cos lettuce was completely not in the market and he substituted it with iceberg lettuce and said that he had to make difficult business decisions to avoid his margin shooting.

The flood crisis made it hard for the people to get fresh and quality fruits at affordable prices. For instance, pineapple and oranges had doubled in price although they are common ingredients in the market. Pineapple, which used to cost $28 a box, now costs $56 a box likewise to oranges. All other fruit boxes had risen by at least $10 a box.

International Monetary Fund (IMF) (2008) provides that the model of supply and demand can be used to show, the likely short-term impact of the flood on the price and quantity of fruits and vegetable in the Australia market. The supply and demand model applies two assertions about how people will act. First, the model will show the amount buyers will be willing and ready to buy depending on the price and other factors that are assumed constant. Second, the model shows the amount the sellers are willing and ready to sell depending on the price and other factors that are assumed constant. Mathematically the model is

Qd=f(prise, X)

Qs=g(prise ,X)

Where X represents constants. For simplicity we can have a simple system that has an equilibrium condition that is Qd=Qs. This implies that if the amount sellers are willing to buy is equal to the number buyers are willing to buy an equilibrium exists. The flood causes the prise of the fruits and vegetables to go high and as well make the quantity of the products cone down. Economically we can say that, the smaller the quantity supplied the higher the prize the product will cost. This is provable from the essay above as the prizes of fruits like pineapples and oranges double with the decrease of their supply due to Queensland floods. By plotting the quantity demanded and the prize it is evident that when the price are high quantity demanded if low and whereas when the prize is highest the supply also goes high. With this graph equilibrium price is at $3 .

The short-term effect on the fruits and vegetables due to the Queensland flood will affect the quantity supplied and likely the selling prize. Quantity supplied will really change unless changes occur in the expectations of the product. Assuming there is no change in expectations of fruits and vegetables in Australia, only the supply curve will shift to the left while demand curve will remain unchanged. The model below represents this change.

The equilibrium prize goes high as the quantity supplied drops.

If the technological breakthrough ensures that the Australia begins to import pumpkins, which are as good as, domestics are one then, the demand for the scarce product will increase. In addition, the supply will increase. This wills make the demand curve to shift slightly towards the right and the supply curve to shift towards the left resulting in higher equilibrium price and quantity. Sellers of pumpkin in the market will change their behavior to capitalize on the high demand and thus will only move along the supply curve. The model below shows the change of demand curve.

However, if consumers are uncertain regarding the quality of imported pumpkins, use the demand and supply analysis to explain the impact on the pumpkin soup market in the restaurant industry.

If the consumers are uncertain regarding the quality of imported pumpkins they will have divided mind and this will affect the way they will react to the product. The perception the customers / consumers will influence negatively or positively the pumpkin soup in the restaurant. The forces of demand and supply will determine the market prise of the pumbkin soup. Demand for the pumpkin soup which also refers to the ability of the consumers willing and able to buy the soup can be enhanced by the following factors. Price of other related products; the prize of the local pumpkin soup will affect the pize of the imported punmbkins soup. This is because the new soup has not been accepted yet by consumers and its quality is still under scrutiny.

The income of the people will also influence the market of the new product. A rise n income increases people’s purchasing power to buy more products or demand for new markets exploration by using new products.

Taste; since the consumers have not yet chosen the pumpkin soup subjectively it becomes hard for the new product to be sold. The soup may find rebellion at first but when the customers will have known its quality then it will begin to sale in the restaurants.

Expectations of future demand; given that the pumpkin is imported while there is a shortage in fruits and vegetables in Australia due to floods, future demands of the soup may make the customers to go for the soup especially if the soup proves to be good in quality(Ivanic, and, Martin. (2008)..

Substitution effect; given the situation o f local domestic pumpkins scarcity calls for substitutes to serve the customers. The new pumpkin soup although has not been proved to be quality will supplement the local scares pumpkin soup or even substitute it if its prize will be lowers than the local one.

Conclusion

An increase the demand while holding the supply constant causes the prize to increase. Whereas the decrease in demand with supply held constants, cause the price to decrease(Ivanic, and, Martin. (2008)..

The law of demand says that the quantity demanded varies inversely proportional to the price while the things are held constant. The higher the price the smaller the quantity and the lower the price the larger the quantity demanded. The law of supply also states that the higher the product price while other factors are held constant the higher the demand for quality .the lower the price the smaller the quantity and the higher the price he greater the quantity is supplied (Ivanic, and, Martin. (2008).

Reference

International Monetary Fund (IMF). (2008). Riding a Wave: Soaring Commodity Prices May Have aLasting Impact. Washington, D.C.: Finance and Development, Volume 45, Number 1March.

Ivanic, M. and W. Martin. (2008). Implications of Higher Global Food Prices for Poverty in LowIncome Countries. Washington D.C.: World Bank, Policy Research Working Paper 4594,

http://www.theherald.com.au/news/local/news/general/fruit-veg-costs-surge/2056289.aspx