“Supply always comes on the heels of demands.” -Robert Collier. Avocado prices rise because of the increasing demand and the decreasing in supply in California and Mexico. It happens because of the changing season, causing the price of avocados to double what it was a year earlier. Demand also has risen up, for example in America per capita consumption according to U.S. Government was 6.9 pounds in 2015, and meanwhile on 2006, the per capita consumption is only 3.5 pounds. The increasing demand for avocados is not only in America, but China, Europe and others areas of the worlds. Consumers are being drawn to the fruit not because only for the taste but also for its health benefits. The news states that in California the production of avocados will be decreased by 44 percent this year, which will have an effect on the demand as well. The shortage of avocados has risen up the retailed price from 98cents to $1.27.
Demand refers to how much quantity of a product or service that is desired by buyers. The quantity demanded is the amount of a product, that people are willing to buy at a certain price. Supply represents how much the market can offer. The quantity supplied refers to the amount of a certain good, those producers are willing to supply at a certain price. Supply and demand have a relationship, where if one of the factors is decreased, the other factor will increase. This article shows that producers can’t fulfill what consumer desire which is more avocados, it is stated that avocados producer will supply less due to changing season, meanwhile, the buyers or the consumers demanded more avocados, which is doubled than before, because of the health benefits.
One of the laws of supply and demand is that, if there is an increase in demand and a decrease in supply, it will cause an increase in the equilibrium price, but the equilibrium quantity cannot be determined. Producers will have a higher price in order to supply the good, in this case, the goods are avocados, therefore price for avocados will increase.
The market is affected by the decrease in supply and an increase in demand. From figure 1, the demand curve shifted to the right, due to consumer wants to consume more avocados, mainly for its health benefits. and the supply curve shifted to left, making the equilibrium price from P into P1, which means the price is higher. From figure 1, the quantity did not move at all, it happens because like I mention before the quantity cannot be determined, but since the article stated that avocados producer supply less, meaning there is a possibility that the quantity is decreased.
The article stated that the quantity demanded avocados have risen, but the producers cannot fulfill their needs, because of seasonal change, the producers can’t harvest avocados in a large quantity making them supply fewer avocados. To solve this problem, we will use the method that the government uses, which is the fiscal policy, meaning to increase the tax for avocados, this policy will affect consumer for the most part. Companies or business also can take benefit from this policy since they see an increase in revenues. Because of the increase in price, the consumer will tend to avoid buying avocados, making the demand curve to shift to the left, since the consumer will buy fewer avocados. But there is also a downside to using this policy, producers can risk having inflation.
If the producers use the money in investing technology to avoid small harvest during seasonal change, the producers can produce more avocados, since technology is one of the factors for supplying goods, meaning that they can supply more avocados, making the supply curve to shift to the right, since there is an increase in the production of avocados.
In conclusion, to fulfill consumer desire, the government needs to increase the tax for avocados, so the producer can invest in technology to supply more goods which are the avocados, by increasing the tax it also has an impact on the demand curve, because of the high price the consumer will demand fewer avocados. By using this policy, demand for avocados will decrease and supply for avocados will increase, making it into a more stable equilibrium.