Read the following excerpts from the article “Fruit, veg costs surge’ by Todd, Dagwell, published in the Herald on January 25th 2011 and answer questions 1, 2 and 3. (please see this article below and also attached)
This assessment is designed to test your understanding, application and communication of economic theory. You will be given a newspaper article to read, and you will be required to answer economic questions based on this reading. Detailed information including the article can be found below.
You are expected to use graphs to explain your answer. It will be important to write within the words limit outlined for the assignment
Assume that the Australian government wishes to keep fruit and vegetable prices from rising to a socially unacceptable level. There are two options being considered: lift the import ban or impose a price ceiling.
You are expected to write an essay exploring the major issues raised in the article.
In particular, you need to address the following issues:
1. 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. (5 marks)
a) If a technological breakthrough ensures imported pumpkins are as good as domestic qualities and are thus allowed to be imported into Australia, use the demand and supply model to explain the short-term impact on the pumpkin market. (4 marks)
b) However, if consumers are uncertain regarding the quality of imported pumpkins, use the demand and supply analysis to explain the impact on the pumpkin soup market in the restaurant industry. (4 marks)
3. Referring to the determinants of price elasticity of demand as they apply to pineapples analyse the likely impact on the market if the government imposes a retail price ceiling of $40 a box on pineapples. Specify any assumptions you have made. (8 marks)
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