Tuesday, 29 September 2020

Coronavirus and the market for oranges

Last week, the New Zealand Herald reported:

Kiwis desperate to stay healthy in the midst of the Covid 19 pandemic have been buying up vitamin C in whatever form they can get it.

Since the virus hit our shores in early March, sales of oranges, kiwifruit and vitamin C supplements have surged.

Citrus New Zealand domestic market lead James Williams said sales of New Zealand navel oranges were 10-20 per cent higher than in previous years meaning Kiwis gobbled between 800,000 and 1.6 million kilograms of extra oranges.

He said pre-packed bags of the fruit had proved especially popular during the peak of the outbreak in New Zealand because there was less human interaction involved...

The popularity of the fruit this season meant consumers would have seen the price of the fruit go up in the last seven-10 days as the supply of the fruit dwindled, Williams said.

Consumer tastes and preferences are one of the factors underlying the demand curve. As consumers' preferences shift towards oranges, they demand more of them at each and every price. As shown in the diagram below, the market for oranges was initially in equilibrium where demand (D0) met supply (S0), at a price of P0, and Q0 oranges were traded. The increase in demand to D1 increases the quantity of oranges traded to Q1, and increases the price to P1.


The same effect is happening in other markets mentioned in the article, including kiwifruit (also increased demand because of high Vitamin C content) and avocados (because people have more time for cooking their own meals, they seem to be demanding more avocados).


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