QLD Banana’s and Green Tea

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6QLD Banana’s and Green Tea

Topic A: Banana Prices in QLD

Question 1

Buyers and sellers play an essential role in the markets. While the buyers tend to determine the demand side of a certain market, the sellers tend to determine the supply side on the markets. A major movement in the supply and demand that would be consistent with the changes shown in the banana prices from $2-$3 for every kilogram top $13-$16 dollars is the availability of surplus products since people may totally shun away from making purchases of the bananas as they would feel that the price is unreasonable. Additionally, a great number of consumers may opt to make purchases from the close substitutes of the products which may be lowly priced as compared to the prices of the bananas in QLD. When the demand of a product is high and the product is scarce, the price of products is heightened. This clearly shows that, a change in price at first leads into a movement along the supply curve and also along the demand curve and thus, it leads to a notable change in the quantity of the product that is supplied and demanded (Lazear, 2000). This is clearly shown in the diagram below


Diagram 1: movement in the supply and demand curve

Additionally, when the price of a product augments to extremes, the demand tends to decrease though the supply of the product may be readily available. Based on these, the consumers tend to make purchases of substitute products or at times may totally stop from making the purchases thus creating a surplus (Lazear, 2000). The change in price of bananas can be attributed to a number of factors and this includes factors such as a cold winter. This is mainly attributed to the fact that cold weather leads to a slow growth in banana since few bunches will mature and thus the product will be scarce leading to scarcity of the product (McKillop 2014). Additionally, there was shortage after the category-5 Yasi tore that passed through the North and it wiped out about 75% of the banana production in Australia (Elks & Owens, 2011).

Question 2

In consideration of the fact that the prices of Bananas increased in Queensland between the year 2006-2009 and the quantity sold decreased between the year 2011 and 2013. I think it would be possible that the demand of bananas decreased between the year 2006 and 2009. This idea is supported by the idea that, when there are price changes, consumers tend to refrain from making purchases and in instances when they have to make the purchases, they have no option but to decrease the amount bought so as not to exceed their budgets. This means that, they are likely to spend the same amount of money but get a smaller quantity of the product (Lazear, 2000). At the same time, the demand may have decreased as the consumers looked for other alternatives, for example, they may have purchased other kinds of fruits which were lowly priced and affordable to them.

Topic B: Green Tea market in China

Question 1

In reference to the article on the economist (2015) which has described that the price of Longjing Green Tea in Hangzhou Zhejiang, China had increased 30-fold between January to April 2014. The price seems to have increased due to a number of factors with the major one being the decrease in the area that has commonly used and that had been set aside for growing the tea in the Hangzhou, Zhejiang actually the area has been halved. This was attributed to the fact that, tea had fetched lower prices in the previous years and thus people failed to see it as a way of attaining a sustainable income and had therefore made use of their lands in others ways which they saw as beneficial to them in that, they could attain more profits as well as sales from other crops. Additionally, the price of the tea also changed as a result of the scientific research that had been conducted. The research findings were that, the particular green tea acted as a good remedy to prevention of the swine flu which had been prevalent in a number of regions in China. Thus, due to the added benefits that the tea had a higher price had to be charged for use of the commodity and these eventually lead to an increase in the price of the green tea.

Question 2

Based on the fact that the size of the lands that had been used to produce the tea in the previous years had been halved, the quantity of tea is also likely to decrease since the small pieces of land left cannot produce the same tea as before in terms of quantity. With this in mind, it would be noteworthy to conclude that, the quantity of tea will decrease considerable and this will lead to a lesser supply of the needed amount of tea in the market. Thus, the demands of the consumers of the tea will not be met in the most effective manner since the demand of the products exceeds what is supplied. Additionally, due to its associated benefits such as being a remedy of swine flu, it will see a great number of consumers wanting to make use of the product even those who have never tried it before (The Economist 2015). This will further augment the demand for the product in the market. The diagram below shows that the demand for the Green Tea is high while the supply is low.

Professor 1

Figure 2: demand for the Green Tea is high while the supply is low.

When demand is so high and the supply is low, there is scarcity of the resource in the market since the available products are purchased on the spot by the available consumers while the others loose out in the purchase. This will eventually act as a determinant in future increase in the price of commodities. This decision will be informed by the fact that, a great number of people are in need of the products and thus strategies need to be adopted to lock out some of them by imposing a high price (Andrew and Andrew, 2008).


Andrew, C & Andrew, S. (2008). The Foundations of Positive and Normative Economics. Oxford: Oxford University Press.

Elks, S. & Owens, J. (2011). Cyclone Yasi to see banana prices stay high till midwinter. The Australian. Retrieved May 16, 2015, from http://www.theaustralian.com.au/archive/business-old/cyclone-yasi-to-see-banana-prices-stay-high-till-midwinter/story-e6frg95o-1226032922362

Lazear, E. (2000). Economic Imperialism. Quarterly Journal of Economics, 115 (1), 99–146.

McKillop, Charlie 19 Nov 2014, Banana prices up as cold winter in far North Queensland affects. ABC News. Retrieved May 16, 2015, from http://www.abc.net.au/news/2014-11-20/banana-prices-up-as-cold-winter-takes-effect/5905630