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BUS102 - Economics for Business - Assignment

   

Added on  2020-03-02

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ECONOMICS FOR BUSINESS 1Demand and Supply of Olive Oil in AustraliaStudent’s NameCourse IDUniversityDate

ECONOMICS FOR BUSINESS 2In order to figure out the price of a necessary commodity, the status of demand and supply of the resource can be identified as one of the crucial determining concepts. In the meanwhile, there are various factors to be taken into account that has affected the supply and demand side (Adil, 2016). Precisely, increase in demand can contribute to an incline in the price of a commodity in a free market where supply is constant. Similarly, a shortage in supply can liftthe prices as well (Taylor, Stonebarger and Leven, 2015). In this particular study, the article by Erickson (2017) has been explained containing the demand and supply side status of olive oil in the Australian market. According to the article, due to the shortage in supply of olive oil at the international market, the price of the commodity can jack up around the world. Apart from the demand shortage, soaring demand from the Chinese economy has added excess fuel to the rise in the price of olive oil. In this study, it has been clearly discussed how the shortage in supply and growth in demand have contributed towards the price surge of olive oil in Australia as well as around the other international markets (Erickson, 2017). Also, the impact of price rise has been a significant challenge for the olive oil consumers as the olive oil lovers have to pay much higherprice for the commodity. Australia can be identified as the second largest consumer of olive oil in terms of per capita consumption right behind the Mediterranean (Erickson, 2017). Evidently, the country has consumed the double amount of olive oil annually that it has produced domestically. Olive oil is majorly used in the restaurants due to low presence of fat. Recently, erratic weather conditions inthe major olive producing countries such as Spain, Italy, and Greece have discouraged the production of the commodity. Due to decimate crops, the shortage of the commodity has been

ECONOMICS FOR BUSINESS 3created. Apart from that, the growing costs of production have downcast the global production of olive oil (Herbert, 2016). Additionally, the consumption of Olive oil has increased in the Chinese market, which has emerged to a major problem for the global olive oil producers. For instance, the people of China consume around AU$260 million worth of olive oil and 99 percent of the product is imported from other major olive oil producing markets. According to experts, the production of olive oil is set to decline by eight percent globally. With increase in demand and shortage of supply, the price of olive oil is drastically increasing in the global market. For example, the price of olive oil has increased by 30 percent in Italy and around 10 percent in Spain. Buyers have stated that the price of olive oil has been up by 13 percent at $8.44 per litre in the global market (Erickson, 2017). In the Australian market, most of the olive oil demand has been met from the external markets. Hence, the rise of the price in the global market can create a massive impact onthe importers as well as the domestic consumers. On the basis of the demand and supply theory, it can be seen that the rise in the demand for olive oil can be evident in every part of the world including Australia due to the lesser amount of fat present in the oil. On the other hand, the fall in the supply causing due to unpleasant weather and increase in fruit flies and bacteria. Hence, it can be seen that the increase in the quantity demanded is relatively lesser than the decrease in the quantity supplied (Kolberg, 2008). Hence, a tremendous hike in the price of olive oil can be evident in the global as well as in the Australian market. A figure has been presented with detailed explanation herein below:

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