Tag Archives: Supply and Demand

Supply and Demand Assignment

Article: https://www.thestar.com/life/2018/03/18/soaring-vanilla-prices-could-mean-price-hikes-at-local-bakeries-and-ice-cream-shops.html

Market: Vanilla

The prices of vanilla are higher than they have ever been. The wholesale price now runs at $850/kg for premium beans, which is 10% higher than last year (which was 30% higher than the year prior). Just 5 years ago, vanilla could be obtained at just $20/kg.

Consumers began to demand more natural ingredients in products like cakes, chocolate and yogurt, which led to big companies like Hershey converting to real vanilla for their chocolate. At the same time, the supply decreased due to plantations outside of Madagascar giving up on the labour-intensive crop that were priced low at the time. In March 2017, a cyclone hit Madagascar, the leading producer of vanilla in the world, which destroyed much of their crop.

The increase in demand was a result of the demand determinant: buyer’s preferences as they simply wanted more vanilla in their food products. The decrease in supply that occurred was a result of the supply determinant:  cost of factors of production because the plantations stopped producing vanilla due to the low prices and labour-intensive nature of growing the crops. The natural disaster that occurred would also be categorized under the supply determinant of cost of factors of production.

Ultimately, the price at equilibrium increased while the quantity at equilibrium is ambiguous.untitled-drawing-2.png

Advertisements

Supply and Demand Assignment

By: Mehak Shah

Article: Californians struggle to pay for rising water prices 

Supply and Demand Assignment_Mehak

Water can be seen as the ultimate commodity, a necessity for every human being on the planet. However, with such a high demand, and a struggle to maintain the little supply, Californians find themselves paying extremely high prices for small quantities of water. The price of water in California has increased at six times the rate of inflation across the state, which caused monthly water bills for residents to increase from $58.49 to $100.14 (assuming the household estimate of 100 gallons per month).

Various factors are the reason for this change in price. First of all, the state has a natural desert climate, which means that water is already scarce. However, climate change has caused droughts to last for longer periods of time, and warmer hot spells in the region than usual. Due to this, water must be obtained from distant sources, and this requires infrastructure whose maintenance costs are raising consumers’ water bills. In addition to this, in some districts, water has become contaminated, which must be treated before reaching consumers.

These reasons can be classified as the supply determinant of costs of factors of production. Overall, supply has shifted left as the supply decreases and establishes a new equilibrium point where less quantity is supplied at a much higher price.