Answer to Question #153598 in Microeconomics for xenon

Question

Food prices often rise or fall with good or bad harvests or because of a change in demand. A

recent example is the price of Brazil nuts, which by May this year had risen over 60% on

European markets. Part of the reason for the price rise has been on the demand side.

Consumption of Brazil nuts has increased as more people switch to healthier diets. This includes

the purchase of the nuts themselves and as part of healthier snack foods. With supply being

relatively inelastic, any rise in demand tends to have a relatively large effect on price. A more

acute reason is on the supply side. There has been a very poor harvest of Brazil nuts. The nuts

are grown largely in the Amazon basin which has been hit by drought linked to the El Nino

effect. This, however, is only a temporary effect and future harvests should increase again as

rainfall returns to normal. However, in the longer term, rainfall patterns may change with the

effects of global warming.

Answer 1

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