University Economics Case Study: Avocado Price Analysis

This case study analyzes the global avocado market, focusing on price fluctuations and the interplay of supply and demand. It examines the reasons behind the increase in avocado prices globally, including supply shortages due to drought, growers' strikes, and floods, as well as increased demand from the United States and China. The study uses economic concepts like supply and demand curves to illustrate these factors. It then provides a specific analysis of the Australian avocado market, highlighting its relative stability due to domestic production and a diverse growing climate, with prices expected to remain stable. The case study concludes that while other regions experience price hikes, Australia faces no immediate risk of a price increase, offering insights into the future of the avocado market and the potential impact of global events on regional markets. The study also includes references to academic sources to support the analysis.

Economics
Name of the Student
Name of the University
Course ID

Introduction
 Increase in price of Avocado globally
 Price has increased in California, Mexico and Peru
 Both demand and supply side factors
 Supply shortage
 Drought, growers’ strike, flood
 Increased consumption of avocado
 Demand has increased in United States and China
 No risk of price increase in Australia

Cause of increase in Avocado
price globally
 Concepts of demand and supply
 Supply of avocado has declined
 Supply curve shifts to the left to S1S1
 Demand for avocado increases
 US per capita consumption is 3.1 kg in 2015
 In China demand increases by 250 percent
 Demand curve shifts right to D1D1
 Fall in supply is greater than demand increase
 Price increases and quantity falls
Figure 1: Demand,
supply and Avocado
price

Scenario in Australia
 Prices are expected to be at a stable state
 Price remains around $2.80 to $3.00.
 Less dependency on imported avocado from the affected regions.
 Average Avocado consumption: 3.2 kg per person
 Avocados are mostly produced domestically
 New Zealand account 80 percent of Avocado import
 Supply comes from Western Australia and Queensland
 Produces nearly 67, 000 tonnes of avocados in 2015-16.

Production, Import and
Consumption of Avocado in
Australia
Figure 2: Production and
Consumption of avocado in
Australia
Table 1: Avocado harvesting in
Australia
• Continuous increase in per
capita consumption.
• Increase in demand overtime
• Increase in production and of
Avocado
• Very small share of import
• Steady supply of Avocado
• Harvesting throughout the year
• Diverse range of growing climate
• Helps to grow Avocado all over the
year

Analysis of Avocado market in
Australia
 Relatively stable demand and supply
 Consumption increases overtime
 Indicates an increase in demand
 shifts the demand curve from DD to D1D1
 Supply remains stable
 Domestic production and export
 Supply increases as well
 rightward shift of the supply curve to S1S1
 Price remains stable at P* Figure 3: Demand and
supply of avocado in
Australia

Future of Avocado market in
Australia
 Possibility of increase in price of processed products
 Such as Avocado pulp that are imported from Mexico
 Australia exports only 5 percent of domestic production
 Export goes mostly to Asia (Singapore, Malaysia, Indonesia and Hong
Kong)
 Supply shortage in California, Mexico and Peru
 Possibility of increase in Australia’s export demand
 Might cause Avocado shortage in future
 Currently, not much risk from global market condition

Conclusion
 No risk of price increase of avocado in Australia
 California, Mexico and Peru experienced a price hike
 Supply shortage (drought, growers’ strike and flood)
 Increased demand from US and China
 Price is expected to remain stable in Australia
 Balance state of demand and supply
 Stability in price

References
 Booth, A. (2017) Cost of avocados in Australia unlikely to rise amid global
price hike. (2020). SBS News. Retrieved 16 March 2020, from
https://www.sbs.com.au/news/cost-of-avocados-in-australia-unlikely-to-rise-
amid-global-price-hike
 Cowell, F. (2018). Microeconomics: principles and analysis. Oxford University
Press.
 Fine, B. (2016). Microeconomics. University of Chicago Press Economics
Books.
 Kolmar, M. (2017). Principles of Microeconomics. Springer International
Publishing.
 Mankiw, N. G. (2020). Principles of microeconomics. Cengage Learning.

Thank You