Question

-Demand increases due to increasing interest in a superfood.

-Heat wave hurt production – further adding to the price hikes. In some cases, supermarket prices for avocado prices doubled in less than six months last year.

-consumer prices could skyrocket further if a much-discussed import tax is applied to goods coming into the U.S. from Mexico.

According to following conditions above,

1. Describe how the avocado market is impacted in this report. Which curves (i.e., supply and/or demand) are shifting and what is causing them to shift?

2. What is an import tax? If an import tax is imposed by the U.S. on Mexican goods, what impact will it have on the market price and quantity of avocados? Will it impact other markets? How might the import tax affect the revenue of avocado farmers in the U.S.? Explain.

Answer 1

Demand increases due to increasing interest in a superfood.

A change in consumer tastes and preferences. This is one of the determinants of demand. This will cause a shift in the quantity demanded. The demand curve shifts to the right (increases). The supply remains the same. The equilibrium price and quantity increase.

-Heat wave hurt production – further adding to the price hikes. In some cases, supermarket prices for avocado prices doubled in less than six months last year.

Decrease in supply due to bad weather. The supply curve shifts left. Demand is the same. The equilibrium price and quantity decrease.

-consumer prices could skyrocket further if a much-discussed import tax is applied to goods coming into the U.S. from Mexico.

There is a change in the expectations of consumers. Consumers may want to stock up avocados. Demand will increase. The demand curve shifts to the right. Equilibrium price and quantity increase.