Recently in Australia Avocados have reached record prices due to an increase in demand and scarce supply in the current market. This situation is caused by a shortage in the avocado market. A shortage is a situation where the current demand for a product or service exceeds the available supply. This has happen in Australia as there has been a supply shock that has caused the supply to decrease by about thirty per cent from “360,000 trays to below 100,000 per week”. In this case Demand increases due to two of its determinants increasing, the taste and preferences of the consumers and as mention in the article “it’s not easily substituted by something else” meaning there are a very low number of substitute goods to satisfy them. The current decrease in Supply is due to a negative supply shock that caused supply regions to decrease by the 30 per cent lower the production of imported avocados from New Zealand, which has decrease …show more content…
As demand for avocados continues to increase due to it ”being such a unique fruit, it is not easily substituted by something else”. Supply “S1” shifts to the left due to the supply shock affecting the production of Avocados to “S2”. The shortage in quantity is shown as the distance between “Q1” and “Q2”. This causes the equilibrium price “P1” to shift to “P2” raising the equilibrium price and the shortage causes the quantity supplied to decrease. Then demand “D1” shifts right due to “D2” meaning demand increases due to the low number substitutes available in the market and the tastes and preferences of consumers. Shifting the equilibrium price from “P2” to the new equilibrium price “P3” increasing the price even higher showing as mention in the article that “there was the possibility that prices could go as high as $5.00 per