Nick’s Supply & Demand Assignment (Mark 2)

Source: Watermelons: large supply depresses prices in South Africa

Throughout the 2015/2016 growing season, South Africa’s watermelon industry was flourishing. A drought – and thus extreme heat and dryness – greatly increased consumer demand for the fruit, while diseases were largely ineffectual on the crop yields due to the rising temperatures. As a result of consumers’ steadily increasing demand for the fruit, and with prices rising to new highs, watermelon farmers greatly increased the number of watermelons planted in the 2016/2017 season. Thus, the supply curve for watermelons shifted to the right – sellers increased the future supply because they expected the trend of increasing consumer demand to continue raising the price of watermelons. The supply determinant was seller’s expectations.

However, the drought came to an abrupt end, with dry weather replaced by overcast skies, an abundance of rain and cooler temperatures. As a result, consumers’ demand for watermelons in 2016/2017 season has decreased. Thus, the demand curve for watermelons shifted to the left – buyers’ demand for watermelons fell as a result of the climate, which made watermelons less appealing in cooler weather. The demand determinant was buyer’s preferences / consumer’s taste.

As a result, the price of watermelons fell dramatically, with an increase in supply of watermelons but a decrease in demand. It is unknown precisely whether the equilibrium quantity has increased, decreased or remained the same from the 2015/2016 as a result of these changes.

Supply And Demand Assignment Mark 2

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