Tag: determinants of supply

From October 2007 to March 2009, stock markets around the world fell massively. In the UK, the FTSE 100 fell from a peak of 6752 on 15 October 2007 to a trough of 3461 on 9 March 2009 (a fall of 49 per cent). By the end of August 2009 it had reached 4944 (a rise since March of 43 per cent). Does this mean that the March value represented an over-correction downwards? Did the subsequent rise represent an over-correction upwards? Are stock markets about to plummet? The following two articles reflect on the past and look into the future!

World Wide Stock Market Crash on Pause The Market Oracle (3/9/09)
Are shares about to fall off a cliff? BBC News (4/9/09)


  1. What is meant by the ‘efficient (capital) market hypothesis’?
  2. If stock markets are overvalued, does this mean that they are inefficient?
  3. Why might (a) stock markets plummet in the near future; (b) carry on rising? Why don’t the ‘experts’ know which will happen?
  4. Explain why markets may over-shoot their long-term equilibrium value?

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.