Report on Avocado Shortage: Economic Implications and Analysis

This report examines the avocado shortage in the United States, focusing on the economic factors that contributed to the crisis. The analysis begins by outlining the context of the shortage, which was primarily caused by conflicts between avocado farmers and shipping companies, and the subsequent impact on prices. The report then applies macroeconomic principles such as price ceilings, producer surplus, and consumer surplus to explain the market dynamics. It highlights how the reduction in supply, coupled with consistent demand, led to price increases, and it explains the role of government intervention. The study also references relevant economic theories and literature to support its findings. The conclusion summarizes the key takeaways, emphasizing the effects of supply and demand on avocado prices in the US market.

RUNNING HEAD: ECONOMICS 0
Economics
[Type the document subtitle]
Student Name
6/17/2019

Economics
1
Shortage of Avocado in America
The case of avocado shortage in America was examined. In the analysis, it is known that the
supply of the avocado was reduced because of conflict between avocado farmers and the
companies that pack and ship the goods all over the world. The consumption of avocados in
America was approximately 77% of the total production of 2.05miilion tons (Diaz, 2018). At the
macro level, the concept of price ceiling was applied in that situation as the supply for avocado
was low and demand of that was higher that resultant in higher prices of the product but due to
government intervention price couldn’t be rose beyond a limit. The price floor is the lowest
price of a commodity and for avocado; it was 10 to 12 pesos a kilo. Avocados supply fallen due
to political reasons as Mexico stopped to export the goods because of price negotiation issue that
affected the price of avocado in the US and price was at the highest as the demand of avocado
was high it created a situation of disequilibrium in between quantity supplied and quantity
demanded. As the demand for goods increases and supply remain the same that will affect the
price and the price of good also increases (Goodwin, Harris, Nelson, Roach, & Torras, 2014). In
relation to this case, producer surplus is the difference between highest value of a product and
market price whereas consumer surplus is the gap in lowest price consumer is ready to pay and
the market price of the product (Boyes, 2012). In conclusion, avocado market shortage in US
resultant into the higher price of the avocado as the demand of that remains the same in the
market.
Price of
Avocado
Quantity of
Avocado
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P
QQ1
S1
SD

Economics
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References
Boyes, W. (2012). Managerial Economics: Markets and the Firm. US: Cengage Learning.
Diaz, C. A. (2018, November 9). Price Dispute Halts Shipments of Coveted Mexican Avocados.
Retrieved from Bloomberg: https://www.bloomberg.com/news/articles/2018-11-08/price-
dispute-halts-shipments-of-coveted-mexican-avocados
Goodwin, N., Harris, J. M., Nelson, J. A., Roach, B., & Torras, M. (2014). Macroeconomics in
Context . London: Routledge.