Tag Archives: Supply and Demand Assignment

Supply and Demand Assignment

Market: Tomatoes

Source: https://www.thenewsminute.com/article/tn-farmers-dump-tomato-harvests-lakes-after-prices-drop-77230

There was a drastic fall in the price of tomatoes in Tamil Nadu, accompanied by a large increase in quantity. Over a 3 month period, the price of tomatoes dropped from Rs 20 to Rs 2, and farmers such a large excess quantity that they proceeded to discard freshly harvested tomatoes into lakes.  This is due to an increase in the supply of tomatoes, while the demand for the crop remained the same. Tomatoes are a short season crop, and require much less water to grow in comparison to the other options available to Tamil farmers, such as the long term crops of sugarcanes and bananas. At the time, there was a limited amount of water dedicated to the irrigation and growth of agricultural crops.  As a short term crop, tomatoes require less water and therefore less cost to grow at the time, in comparison to the farmers’ alternative, long term crops. Tomatoes are sell for a similar price to bananas in the area, and still sell for a higher price than sugarcanes per kilogram. Therefore, due to the lower cost and similar price associated with tomatoes in comparison to alternatives, the farmers expected to gain more profit from tomatoes, causing the supply to increase. This supply determinant is prices/profits of other goods that is responsible for the rightward shift in supply. As the demand is not shifted, the new market equilibrium point has an increased quantity and a lower price.

Increase in Supply