Question

A shortage of avocados compounded with soaring prices has led to a troubling new trend for guacamole as some restaurants switch to using alternative ingredients.

It's the so-called salsa scandal that has guacamole fans outraged.

That oh so popular Mexican superfood has become a staple on menus across the country, but now some establishments in Los Angeles have turned that dip into a dupe, GMA reported.

The pit of the problem -- weather.

In California, the high temperatures have prompted a surprisingly low supply of avocados, making the fruit overwhelmingly expensive.

The price of avocados has doubled in cost since last year to nearly $66.00 a case.
"In previous years, I mean, they've gone up to $110 around this time. $110-per case and we would have to say sometimes we don't have it," said Carlos Thome, who is the operating manager at El Tepeyac Café Blue 2 in California.

The troubling costs have left chefs to take another route, using calabacita or Mexican squash. The vegetable mimics the texture of avocados but is a cheaper alternative to making everyone's favorite appetizer.

"You make this fake one using a summer squash that looks almost like a zucchini and you blend them and you get them to that texture that is a taqueria guacamole. It's pretty eerily similar texture and flavor to be honest," said L.A. Taco editor Javier Cabral.

The pit of the problem might not be the price tag for some restaurants who say the authentic taste of guacamole is priceless.
"I've experimented with it amongst our employees. It's not gonna happen. We can't do it," said Thome. "If we don't like the taste then we're not going to give anything to the customers

1. Graph the market for real guacamole (making sure to label the supply and demand curves, both axis, as well as the equilibrium price and quantity).







a. Discuss how Mexican restaurants reacted to the change in price of avocados. How did this impact the market for guacamole? Did this affect demand or supply? How?





b. Show this change on your graph above by shifting either demand or supply. What happened to the equilibrium quantity of real guacamole? Does your result agree with the article’s findings? Explain.






c. What happened to the equilibrium price of real guacamole? What will this mean for Mexican restaurants who use avocados to produce guacamole?



2. Graph the market for summer squash (making sure to label the supply and demand curves, both axis, as well as the equilibrium price and quantity).







a. Since real guacamole has become so costly to produce, some Mexican restaurants have begun making “guacamole” using summer squash. How does this affect the market for summer squash? Did this affect demand or supply? How?





b. Show this change on your graph above by shifting either demand or supply. What happened to the equilibrium quantity of summer squash? Does your result agree with the article’s findings? Explain.






c. What happened to the equilibrium price of summer squash? What will this mean for Mexican restaurants using summer squash to produce “guacamole”?

Answer 1

1.

a. With the increase in the price of the avacado, the Mexican restaurants have switched to a cheaper alternative and hence start demanding less of avocadoes. This decreases the demand for the avocadoes in the market and hence the demand curve would shift to the left.

b. The equilibrium is where the quantity demanded equals the quantity supplied. Due to decline in the demand of the avocadoes, the demand curve has shifted to the left. This leftward shift would cause the equilibrium quantity to decline to Q' as can be seen in the following graph. As from the article, the findings match with the result because of the declined quantity (demand) and also reduced prices (from $110 to $66per case)

c. The equilibrium price has also declined as we can see in the graph from P to P'. This reduced price will make the Mexican restaurants to increase their demand of avacadoes and can use the authentic product for their services, but in the long run, this risen demand will again increase the prices.