Category: Economics 9e: Ch 02

22nd November marks the day when Americans celebrate Thanksgiving Day. However, the cost of this celebration has increased by 11% in the last year according to figures from the American Farm Bureau Federation. One of the main causes of this is the rise in turkey prices but other factors were important as well.

Thanksgiving dinner cost ‘up 11%’ BBC News Online (16/11/07)


1. Using supply and demand analysis, illustrate the price changes for turkeys identified in the article.
2. Consider possible factors that may have led to the price changes for turkeys identified in the article.
3. Discuss the likely change in the quantity of turkeys demanded as a result of the price rise.
4. What is the likely approximate value of the cross elasticity of demand for cranberry sauce with respect to the price of turkeys?

Bolivia may have the second largest gas reserves in Latin America but it also has an acute shortage of diesel. People have blamed a variety of causes: smugglers, the government and nationalisation. In truth, the cause may be a combination of all these factors, but whatever the cause, the diesel shortage is acting as a significant constraint on further economic development and is an ongoing headache for the President Evo Morales.

Fuelling Bolivia’s crisis BBC News Online (8/11/07)


1. Use supply and demand analysis to illustrate the reasons for the shortages in diesel in Bolivia.
2. Explain the impact that fuel subsidies may have had in causing the shortages of diesel. Use supply and demand analysis to illustrate your answer where appropriate.
3. Discuss the underlying factors that may be leading to the shortages in diesel.

The combination of high global demand for milk and variable weather has led to a rapid rise in the price of milk. Cheese is made from milk (sorry to state the obvious!) and so cheese prices have risen to a new high in excess of £2000 per tonne and further price hikes are expected. One conclusion that could be drawn from this is that it is better to have a takeaway pizza now rather that in a month’s time, but what other effects is this price increase for milk likely to have?

Cheddar hits £2,000 a tonne as global milk demand soars Guardian (15/7/07)


1. Identify the key determinants of demand for cheese.
2. Using diagrams as appropriate, illustrate and explain the changes that have taken place in the market for cheese.
3. Assess the extent to which the price increase for milk can be passed on to consumers of associated products like yoghurt and cheese.

Changes in house prices could be considered a national obsession in the UK and recent speculation about a property crash or a crash in the buy-to-let sector of the market has been no exception. Many commentators differ about the possible direction of house prices with average annual increases of around 10% continuing. So will the sector crash? Or won’t it? The articles below consider some of the issues on the supply side and the demand side of the market.

Head to Head: Will property prices crash? BBC News Online (13/03/07)
Five million new homes needed Guardian (16/03/07)
Past report of buy-to-let’s death have been exaggerated Guardian(21/02/07)
Britain likely to need 5m new homes by 2027 Guardian (17/03/07)


1. Describe the main factors determining the level of supply and demand in the housing market in the UK.
2. Using supply and demand diagrams as appropriate, illustrate recent changes in the UK housing market. Draw a further set of diagrams to illustrate the changes in the rented sector of the housing market.
3. Assess the most likely direction of house prices in the next three years and give reasons for your answer.

January 2007 saw unseasonably cold weather in California and the big freeze that occurred may have destroyed up to 70% of the Californian orange crop. Prices as a result of oranges are likely to treble in US shops. The impact on prices elsewhere in the world may be less, but is still likely to be significant as California is an important area in global terms. Oddly the price of orange juice is unlikely to be affected as very few of the Californian oranges go for turning into juice. The majority of oranges for juice are grown in Florida.

Big freeze sours US orange crops BBC News Online (17/1/07)


1. Using supply and demand diagrams as appropriate, explain the impact of the freezing weather in California on the world price of oranges.
2. Using supply and demand diagrams as appropriate, compare and contrast (a) the change in the price of oranges and orange juice and (b) the change in the price of oranges in the USA and the rest of the world..
3. Examine the likely impact of the cold weather in California on prices of other foods.