Answer to Question #64798 in Economics for Redha Lawati

Question

Unseasonably high termperatures and continuing drought are endangering California's avocado crop. Those in the industry fear that if the worst case is realied, the 2017 crop could be substantially smaller than normal. Please describe how these developments would be reflected in relevant markets. Explicitly address these three points:
1) Describe any movements you would expect to see in the demand and supply curves in affexted markets.
2) Given the dynamics you described in conjuction with #1, what effect would you expect to see in equilibrium market quantity? Why?
3) Based on what you descrIbe in #1 & #2, what impacts would you expect to find the on the demend and/or supply curves of the restaurant industry?

Answer 1

Unseasonably high temperatures and continuing drought are endangering California's avocado crop. Those in the industry fear that if the worst case is relied, the 2017 crop could be substantially smaller than normal.
1) We would expect to see the rightward shift of the demand curve in affected market according to the changes in expectations.
2) Given the dynamics we described in conjunction with #1, the equilibrium market quantity will increase according to the shift of the demand curve.
3) Based on what we describe in #1 & #2, the supply curve of the restaurant industry will shift leftward according to the increase in price of avocado which is an input.