Microeconomic Analysis of Vegetable Supply Chain Issues in Australia

This essay provides a microeconomic analysis of the challenges facing the vegetable supply in Australia, focusing on the impact of natural disasters like floods and droughts on supply and pricing. It uses microeconomic theories such as demand and supply, price elasticity, and consumer surplus to analyze the situation. The essay highlights how environmental degradation and increased demand have led to rising vegetable prices, affecting consumer behavior and overall market efficiency. The analysis also considers the role of government investment and the implications for the broader economy, concluding that policymakers need to control vegetable prices to maintain economic stability. Desklib is a platform where students can find similar solved assignments.

Running head: Microeconomic Analysis
Microeconomic Analysis
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Microeconomic Analysis
Table of Contents
1.0 Article Summary..................................................................................................................2
2.0 Introduction..........................................................................................................................2
3.0 Article analysis.....................................................................................................................3
3.1 Demand and supply..............................................................................................................3
3.2 Production possibility frontier..............................................................................................5
4.0 Conclusion............................................................................................................................8
Reference list..............................................................................................................................9

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Microeconomic Analysis
1.0 Article Summary
The main idea of this article is that vegetable supply in the Australian economy is
facing a debacle as the supply of fresh vegetables is falling. Apart from fall in the supply of
fresh vegetables in the country of Australia, the prices of the vegetables are going high and
they are taking drastic form. Key points that have been pointed in the article is that the supply
of the vegetables are falling. Natural disasters in the form of floods in Queensland and
continuous drought in some parts of the country are making the situation worse as the other
regions in the country are having shortfalls in the production. The price of broccoli is
$8.90/Kg, womboks are being sold in $7.90 per head, and cabbages are $4.90 per head. The
concept of the environment degradation is one of the important components in the sense that
most of natural calamities are main made. Peak vegetable industry group in Australia,
AUSVEG is actually worrying regarding the current natural situations in Australia that is
hampering the services. This is a real concern in the sense that Australian vegetable market is
actually a demand and supply driven industry.
2.0 Introduction
This section of the study is mainly going to indulge how the globalisation and increased
greed of human being is actually making the environment polluted and this is the main reason
behind increased level of floods and drought within the country. In order to identify the
impact of floods and draught in the economy the micro-economic theory like classical
microeconomic theory, theory of utility maximisation and Neo-Classical microeconomic
theories will be discussed. Through all these theories, the study will focus mainly on the
pricing mechanism of the country and how the demand and supply are going to be affected by
the market conditions. In Australia, for the first time over a decade the Lindenow farming
areas faced draught in river water. Until date the area dependent on the irrigation water from

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Microeconomic Analysis
the Mitchel River. Most of the Australian economy is having high flood and high level of
draught in the economy. This is important in the sense that through the improvisation of the
artificial culture, the human being is actually taking away natural capacity to produce goods
and services. According to Andrew Bulmer who is one of the largest lettuce growers in the
country and he is one of the biggest supplier of McDonald’s. Along with the fall in supply,
another microeconomic concept that will be discussed is the rate of unemployment rate.
3.0 Article analysis
3.1 Demand and supply
The price of the vegetable is getting increased that is creating lots of problem foir the
common people. Increase in the price of fresh vegetables will be having a direct impact on
the increase in price of the product because fresh food and vegetables need to reach the store
from farm and that will be delivered using trucks that will allow increase in the cost of
production. The paper will be dealing with the increase in the production or shrinking in the
production due to an increased level of price in the fresh vegetables. The study will be willing
to identify the effects of the rise in fresh vegetables price that will be having impact on the
development of other goods and services that are being produced in the economy (Beilharz,
2018). On the other hand, through the implementation of better amount of investment in the
irrigation fascilities in some areas of Australia such as Southern Australia, Lindenow farming
area. To the most surprising most of the vegetable growers believes that if the Victorian
government of Victoria should take the initiative to increase the investment in big and trading
companies. that will definitely increase the urge of the economy to consume more (Zhouet
al.2019). Through the increase the in the fresh vegetables price, the shift in the demand curve
will be increasing the price of consumption. Increase in the price of the unleaded fresh
vegetables price has been increased, however the economy has been facing severe climatic

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conditions that is not at all helping in the development of better quality of vegetables
(Beilharz, 2018). The price of the diesel is having an impact on the price of fresh foods and
vegetables because of the fact that they are to be transferred from the store to the wholesaler
and then to the store. The whole supply chain is depending on the development of the supply
of the fresh vegetables. The burden of price rise will be falling heavily on the customers
rather than producers. The rise in fresh vegetables price is increasing the food products and in
turn is making the demand to fall.
Figure 1: Demand and Supply when the price of fresh vegetables is not increasing
(Source: Created by author)
The above diagram is showing the fact that demand curve is downward slopping. This
is important in the sense that price is having negative relationship with the quantity
demanded. According to the law of demand the increase in price will obviously make the
demand to fall if the goods are normal goods. The leftward shift in the supply curve will be
looking to increase in price. Increase in the price of fresh vegetables in country like Australia
is one of the serious issues in the sense that due to increased level of the price of fresh
vegetables is going to have serious impacts on the increase of price of normal goods that is
being consumed within the economy. Fresh vegetables, diesel and oil products are one of the

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Microeconomic Analysis
important raw materials for manufacturing of other goods and services within the economy
(Beilharz, 2018). Not only this, it is also important to transfer the products from the place of
manufacturing to the store that requires fresh vegetables. Since price of fresh vegetables is
increasing and in terms of the fruits and vegetables, the farmers are price takers, they will
automatically increase of price of food products if the cost of operation is rising than their
expected level. The budget for the consumers will be increasing and will be more problematic
for the consumers and will be facing more problems in spending their income (Beilharz,
2018).
Figure 2: Demand and Supply when the price of fresh vegetables is not increasing
(Source: Created by author)
In the further direction of the agriculture based sector is demand as well as supplier
driven. “We saw broccoli at about $55 a box. It's normally about $45 wholesale”. Through
the development of this article, it has been stated that price in the economy regarding the
vegetables are increasing and they are going beyond their expectations. This will definitely
increase the expenditure budget of the consumers. According to Masters Grocer Association,
the increase in the price of fresh vegetables will not only stick to price rise but the transfer of

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Microeconomic Analysis
the burden will take place on the customers from the drivers end. Members of Masters Grocer
Association are not liable to withstand the levy that will be imposed on them. It has been seen
that few members of the MGA has faced a levy of around 15% and the MGA believes that
this is going to increase in the upcoming period. Through the increased level of price of fresh
vegetables will be having crucial in the sense that development of the increase in
consumption expenditure will be allowing the consumers to consume substitute products. For
example, in the article it has been seen that the consumers will be purchasing sausage instead
of buying T-bone steak. On the other hand, the consumers will not be willing to make
compromise with the health status of their families. With the increased level, fresh
vegetables price will definitely increase the food price for the consumers in the economy. The
development of the food price or the fresh vegetables will increase the food price in the sense
that fresh vegetables is the main ingredients for the production of goods and services
(Beilharz, N. (2019). It is also used for the import and export of goods and services in the
economy. Increase in the price of fresh vegetables will definitely increase the price of the
products shifting the leftward shift of the demand curve (Beilharz, 2018).
The law of supply claims that everything remaining constant price rise will increase
the supply of the goods. Now from this articles supply is falling mainly due to natural hazards
that are actually coming in the form of natural hazards. Both demand and supply of
vegetables are linked with the articles in the sense that through the utilisation of the
vegetables, the economy is not getting availability of vegetables since the price is too high for
the customers. It has been seen that Southern Australia is suffering from hot climate and the
crops are getting damaged and quality of the products are not also up to that mark.

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3.2. Elasticity measurement and determinants
Price elasticity of demand is the degree of responsiveness of demand due to one unit
change in the price variable. The development of the price elasticity of the agricultural
products on the price of fresh vegetables is going to highlight the consequences that the
Australian consumers will be facing if the continuous increase in the price of fresh vegetables
happens in the country. However, the agricultural products are highly price elastic in nature.
This is important in the sense that in the market of the agro based products the farmers are the
price-takers. Now with the increase in the price of the fresh vegetables in Australia the price
of agro based products will be increased. On the other hand, if the prices of the products are
increased then the farmers will supply less in the market. In the article, it has been seen that
the levy of the tax burden will be falling on the consumers. However, the MGA believes that
the price rise will not stay for long and the monetary authority will be looking to control the
impact of the price rise. The farmers through the price taking mechanisms will put pressure
on the intermediary and the return pressure will fall on the consumers.
Figure 2: Consumer surplus due to increase in tax burden

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Microeconomic Analysis
In the above diagram, the incorporation of tax levy will not be having any kind of
impact on the producer surplus. The majority of the burden will fall on the consumers as the
fruits, vegetables are the necessary goods, and they will have to pay more to consume the
goods. Om the other hand, the supply of fruits and vegetables will be highly price elastic in
nature and the farmers will bring less supply of goods to the market if the transportation costs
increases due to increase in the fresh vegetables price.

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Microeconomic Analysis
4.0 Conclusion
The whole study is going to focus on the market of fresh fruit and vegetable due to
increase in fresh vegetables price in Australia. It is important for the study to identify the
consequences of increase in fresh vegetables price that is going to increase the overall price
of the economy to increase. The study has came to conclusion regarding the fact that
production ability of the supply chain due to increase in the price of the fresh vegetables. It
has been seen that in order to increase the external demand of country it is important for the
policymakers to make a control on the price of fresh vegetables that is continuously
increasing in the economy. Cost of production in Australia is increasing with increase in price
of fresh vegetables. The consumer surplus is having one of the important sense in the study
because of the fact that through the levy of the tax due to price rise is going to have serious
impact on the development consuming alternative products. On the other hand, through the
improvement in the price rise of fresh vegetables the overall market of Australia is going to
face problems.

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Microeconomic Analysis
Reference list
Beilharz, N. (2019). Expect to pay more for vegetables as floods, drought
and heat start to cut supplies . [online] ABC Rural. Available at:
https://www.abc.net.au/news/rural/2019-02-26/vegetable-prices-on-the-
rise-after-floods-and-drought/10849234 [Accessed 26 Apr. 2019].
ABC Rural. Available at: https://www.abc.net.au/news/rural/2018-10-18/rising-fresh
vegetables-prices-may-push-up-the-cost-of-fresh-food/10390286 [Accessed 30 Mar. 2019].
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