Economic Analysis of Australian Fruit and Vegetable Market
Severe flooding in Queensland in late 2010 and early 2011 "affected an area the size of France and Germany combined" (IBISWorld.com. January 2011. PP. 1), and contributed to massive spikes in fruit and vegetable prices across Australia on the order of 20 to 30% (The Sydney Morning Herald.com. January 11, 2011. PP. 1). Specific examples of these increases include: "broccoli jumping to $10 a kilo from $6" (The Sydney Morning Herald.com. January 11, 2011. PP. 1), "pumpkin tripling from $1.50 to $6 a kilo, and pineapple doubling from $28 to $56 a box" (Dagwell, Todd. January 25, 2011. PP. 1). These price increases provide a platform from which to conduct economic analysis regarding supply and demand issues, elasticity, and government measures to control price inflation.
Background
The Queensland flooding impacted Australian business and consumers, with the state producing 28% of the country's fruit and vegetable production (IBISWorld.com. January 2011. PP. 1). The loss of "1.6 billion worth of crops" (IBISWorld.com. January 2011. PP. 1) generated a severe supply shortage which manifested itself in higher prices at grocery stores for shoppers, as well as narrowing margins for "small business owners struggling with rising costs" (Dagwell, Todd. January 25, 2011. PP. 1). Certainly, state and national government officials grapple with policies designed to ameliorate the effects of higher food inflation; in this case the policy choices include price controls or lifting the ban on imported fruits and vegetables. These measures will have substantively different results on supply, demand, and prices; but are to be analyzed in the larger context of the flood's impact on producer quantity and consumer demand.
Use the demand and supply model to show the likely short-term impact of the flood on the price and quantity of fruit and vegetables in Australia.
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