Microeconomics Assignment free essay sample

Economics Assignment One Part Two The flood which unusually occurred in Australia from 2010 to 2011 in summer, owing to the unusual amount of rain, destroyed the main producing areas of bananas in Australia, caused a large-scale reduction of bananas in Queensland. Bananas as the first biggest selling fruit in Australian market, the main producing areas for the banana market which flooded in the Cyclone Yasi, has caused the Australian citizens to be concerned about the shortage of bananas.This essay is about discussion of banana market in relationship between supply and demand for bananas after the severe flood from 2010 to 2011 during the summer period. After the flood caused by powerful Cyclone Yasi, the fact that the main producing areas were devastated by the flood, the production for bananas is still experiencing a large-scale reduction, at mean time, the demand for banana remains the same or even increasing compare to last year thanks to an expectation about higher price of bana nas in the future. As Tony Nigro from Fresh who represents producer wholesalers, stated that banana stocks at Melbourne Market were down to 15 percent of normal supply level compared to other years, reaching the lowest level since Cyclone Yasi devastated Queensland producing areas in February (Cooper, 2011). Compared with June in last year, each week the suppliers could get 114,000 cartons of bananas per week. However, this year, and wholesalers could only got 18,700 cartons a week at a shocking price of 13. 00 dollars per kilogram to buy in, and the price in store is approximately 13. 8 dollars, and the highest price skyrocketed even reached to 15 dollars per kilogram, and the old price of bananas usually was 1. 99 dollars a kilogram in June, 2010, hence, the price in June in store is approximately 7-fold the usual price last year (Cooper, 2011). The skyrocketing price is owing to the shortage of the bananas. The shift in demand curve could be caused by many factors, for instance, income, prices of related goods, tastes, expectations and number of buyers, change of input prices, technology, expectations, and the number of sellers.For example, in case of a Smartphone market in Korea, owing to the earthquake took place in Japan in March, where supplies several components, elements, chips to Korean market to produce this Smartphone. After the earthquake, several factories closed down and were not able to produce these core parts for this Smartphone, and the Smartphone factories in Korea cannot produce this Smartphone since there was a shortage of a few elements for producing the Smartphone.This resulted in the decrease in supply of Smartphone in the markets of some countries whose Smart phones are produced in Korea. Law of demand states that as the price of one good increase, quantity demanded for the good decreases. (Gans, King, Stonecash Mankiew, 2009). The goods that consumers choose to buy according to their needs and wants. According to the article, Australia’s banana markets are experiencing shortages of bananas since the Cyclone and flood destroyed most of crop lands in Queensland.The destroyed crop lands including banana farms has significantly decreased the number of banana sellers in the market which resulted left-shift in supply curve. Before the Cyclone and flood, the general price of banana was 1. 99 dollars in the store but after experiencing the flood, the quantity supplied of bananas decrease largely from 114,000 cartons in Melbourne market last year during the month of June to the 18,700 cartons in Melbourne market this year in June. At the original price level of bananas, generally there was dominant supply for the bananas which attributed to lower price ($1. 9) of bananas. However, this year, after dreadful natural disaster, the banana supply in the market was even much less than 18,700 cartons in Melbourne market while the quantity demanded for bananas was still strong. As a result, there is shortage in the banana market. As there is a shortage in the market, market failure occurs. Suppliers will increase the price of product as quantity demanded for the bananas decreases. The price of bananas will keep going up until it reaches the point where quantity demanded of consumer meet quantity supply of bananas.Price rises from 1. 99 dollars to 13 dollars and quantity demanded falls from114,000 to 18,700. Now new equilibrium for the banana market has achieved as quantity supply and quantity demanded for the banana market has maximized. Market failure has fixed. From the article about the shortage of bananas in Australian market and the concern caused by the shortage, we can learn how relationship between price and demand in market affects supply of the market. Supply can be changed by many factors.So far, in this essay we focus on how the decrease in the number of sellers or producers in the market can change market situation and how consumers response to. Suppliers in the banana market increase the price of bananas when there is a shortage in the banana market. In respond to the increase in price of bananas, consumers decrease the quantity demanded of bananas which lead the original equilibrium move to the new equilibrium of the banana market. By this adjustment process of the market, we can conclude that markets price changes according to the change in quantity demanded and quantity supplied for the product.