TOMATOES ARE THROUGH THE ROOF

Tomatoes are through the roof



Tomatoes are Through the Roof

Likelihood of the Rise in the Price of Tomatoes

Demand is defined as the willingness of a buyer to buy a particular product/service at a price while supply is defined as the ability of a firm or producer to provide a particular product/service to the consumer at a certain price. The ''law of demand'' states that, the higher the price, the less the quantity demanded assuming that all other variables remaining the same. The ''law of supply'' states assuming all other variables remaining the same, that the higher the price of a good or service, the greater the quantity is supplied.

The prices of goods and services, in a market economy, are determined by the interface of the market forces of supply and demand. Competition among potential buyers leans to see prices rise, if there are only a restricted stock of some product available; prices are then bid up by the consumers. Likewise, competition among sellers of the product inclines a falling price, so as to attract buyers.



The demand curve, D1, for tomatoes at Australian market shows how the quantity of tomatoes demanded varies with the price. Consumers demand greater quantities of tomatoes, as the price of tomatoes decreases, making a downward sloping demand curve. At higher prices, no tomatoes are demanded by consumers; while at lower prices consumers are willing to purchase tomatoes.

Supply Curve

The supply curve, S1, for tomatoes at Australian Market shows how with the price, the quantity of tomatoes supplied varies. Greater quantities of tomatoes are supplied by producers, as the price of tomatoes increases, creating an upward sloping supply curve. At lowest price, producers supply no tomatoes; while more tomatoes are supplied at higher prices.

The supply curve can be shifted with the non price factor affecting supply changes. The supply of tomatoes shifts inward, from S1 to S3 because of flooding and frost and delayed growing of tomatoes. Prices are expected to rise as still people are tend to pay more money (two months back they were paying $ 1 per kg.) although there are other substitutes available for tomatoes in the market (like use of grated carrots and lettuce in the sandwiches) and canned tomatoes- the substitution effect, but there is not a sudden decrease in the demand of tomatoes with an increase in price which implies tomatoes as an inelastic good. Moreover, the supply is also more likely to reduce because of flooding and frost, entailing the less quantity produced, therefore, the price of tomatoes is expected to rise.

Determinants of the Price Elasticity of Demand of Tomatoes

Price

If the price of a particular good increases, it will result in a decline in demand of that good. For example, as the price of tomatoes increases, people tend to buy less amount of tomatoes resulting in a decline in the demand for tomatoes. It will shift the demand curve from D2 to D1. Similarly, if the price of tomatoes decline, this will result in an ...