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Economics
Observing the Influences that Impact Market Equilibrium
Purchasing fresh produce in a farmers market offers an opportunity to buy direct from a supplier. The process of buying fruit and salad items direct from the suppliers, rather than though an intermediary such as a supermarket, increases the exposure of the purchaser to price fluctuations. Visiting the market, which is held every weekend, over a number of weeks it was possible to see how different influences would impact on the supply and demand for the products, and how this impacted on the prices. The prices of the little gem lettuces appears to be one of the more sensitive products; this may have been due to their short shelf life. These lettuces, unlike other produce, are not suitable to be held for any period in cold storage, so there is not the ability to hold a supply ready for the peak demand.
In the first week, which will be used as the base week, there was a busy market, the weather was dry and the price of the lettuces was at the mid point of prices seen over the entire period, at $0.59
each. There were two market stalls selling the produce, both appeared to have plentiful stock....
will be $0.59 per unit, as seen in figure 1;
Figure 1; Supply and demand for the lettuces
The market was busy, but as the day wore on the level of the crowds started to decrease. An hour before the market closed both of the suppliers had stock left. It is likely that they realized the stock would not last to the following week. With the decreased level of people available to buy the lettuces the farmers had to reduce their prices in order to attract the sellers. The impact of a decrease in the demand is shown in the graph below, which shows the new pricing point of P1. The decrease in demand moves the demand line to the left. Now the new cross over or equilibrium point is at a lower price level. Where the demand decreases and the supply level remains the same prices decrease (Nellis and Parker, 2006).
Figure 2; Decrease in demand
The new price is at point P1.
In the following week there was a lovely sunny day, there were many more people at the market that there week before. It was the weather for salads, so all items that were used to make salads appeared to be selling well.…
References
Baye Michael, (2007), Managerial Economics and Business Strategy, McGraw-Hill/Irwin
Nellis JG, Parker D, (2006), Principles of the Business Economics, London, Prentice Hall
The paper is written generically, so this may be changed for other produce items with a short shelf life.
The price may be changed as needed
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