Tag: equilibrium price

According to the article linked to below, the demand for offal has risen by 15% in France since the investment bank Lehman Brothers went out of business. Over the same time period French butchers have faced a 2.6% fall in the demand for beef. So is the global financial crisis set to make offal merchants rich?

Recipes for the recession bring offal back into fashion in France Times Online (20/11/08)
Let them eat offal Guardian (20/11/08)

Questions

  1. Given the recession in France, as what types of good would you classify (a) offal and (b) beef?
  2. What values would you expect for the income elasticity of demand for (a) offal and (b) beef?
  3. What are the principal determinants of the demand for offal?
  4. Using diagrams as appropriate, explain the changes that have taken place in the market for offal in recent months.
  5. Discuss the extent to which the increase in demand for offal has been caused by the promotional strategies adopted by The National Federation of French Offal Merchants.

Global food prices have been rising significantly in recent months and this has led to food riots in a number of countries, rationing being reintroduced in Pakistan and price controls being introduced in Russia. What has caused these rapidly rising prices and to what extent will they slow the rate of economic development in the Third World?

UK farmers forced to ride income rollercoaster Guardian (26/2/08)
They’re going to need a lot more money to meet the same needs Guardian podcast (26/2/08)
Feed the world? We are fighting a losing battle, UN admits Guardian (26/2/08)
Record rise in fuel prices fuels inflation Guardian (12/2/08)
India’s farmers struggling to keep food on the table Times Online (29/2/08)

Questions

1. Using supply and demand diagrams as appropriate, illustrate the changes taking place recently in world food markets.
2. Assess the main factors affecting the level of farmers’ incomes in the UK .
3. Analyse the likely impact of rising world food prices on the rate of economic development in Third World countries.

With oil prices over $100 a barrel and petrol prices over £1 per litre, it is difficult to imagine a county where the entire tank of a 4×4 can be filled for 42p, but Venezuela is just such a country. Not surprisingly, Venezuelans are resisting any attempt to change the level of subsidy that creates this situation.

Cheap and cheerful: Venezuelans cling for right to petrol at 42p a tank Guardian (18/1/08)

Questions

1. Using supply and demand diagrams as appropriate, show the impact of the Venezuelan fuel subsidy on the equilibrium price of petrol.
2. Assess the impact on economic efficiency of a subsidy on this scale.
3. Discuss the impact on the socially optimal equilibrium level of output of the Venezuelan fuel subsidy.

As if there wasn’t enough bad economic news at the start of 2008, Majestic Wine has been warning wine lovers to stock up early as the price of their favourite tipple is likely to rise considerably during 2008. The company is warning that, due to the strong euro and poor harvests, the price of an average bottle may rise by as much as £1.

Wine lovers find no escape from the woes of world’s economy Times Online (4/1/08)
Majestic warns of champagne price rise Telegraph (4/1/08)

Questions

1. Using diagrams as appropriate, illustrate the changes taking place in the market for champagne and other wines.
2. Identify the principal determinants of the price elasticity of demand for wine.
3. Discuss the extent to which a £1 rise in the price of a bottle of wine will affect the equilibrium market quantity.

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)

Questions

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.