Download Fruit Juice Sales Top 1bn Litres – United Kingdom

Fruit Juice Sales Top 1bn Litres – United Kingdom
The Grocer magazine reports that last year due to greater health awareness of consumers, sales of fruit juice and juice drinks
rose by 4% to more than one billion litres, worth £785 million. Orange was more than half the total, followed by citrus, apple,
and cranberry. Following a very poor harvest of oranges in Brazil this year however, the sales of other fruit drinks are expected
to encroach upon the dominant share of orange juice.
(‘The Grocer’ magazine June 2001)
Questions
a) Draw a market diagram to illustrate what happened in the market for all fruit juices last year.
b) Draw two further diagrams to illustrate what will happen in the markets for orange juice and apple juice following the
poor orange harvest in Brazil, other things equal.
Food Crisis – Zimbabwe
Of the eleven member states of the Southern African Development Community only South Africa and Mozambique will have a
maize surplus this year. The other nine countries have warned of serious cereal shortages. In eight cases this is due to
extensive flooding of farmland. In one, however, the shortages are due to political violence and not to the weather.
Zimbabwe’s agricultural output has been severely reduced by the invasions of the white-owned commercial farms by President
Robert Mugabe’s ‘war veterans’ and the campaign of violence against supporters of the opposition. Zimbabwe is therefore to
import 100’000 tonnes of maize from South Africa and store it until April 2002 when its own stocks are expected to run out.
Local observers say that at least 600’000 tonnes will be needed to feed the population. The government will be compelled to
control the price to prevent sky high food prices.
Source Financial Times – Global Economy
Questions
a) What will be the effect of the floods and violence on cereal prices and output in the nine countries with shortages?
Draw a market diagram to illustrate your answer.
b) What would you expect to happen in April in Zimbabwe when price controls are imposed? Draw a diagram to
illustrate your answer.
Diamonds Down by 26% - South Africa
Sales of diamonds at De Beers, the World’s leading diamond supplier, have fallen by a quarter over the past six months as the
global economic slowdown hit consumer spending on luxury items. The sales of uncut germs in the five auctions it held in the
last six months fell 26% to $2.6bn.
Cutters and polishers have bought fewer rough stones as demand from retailers, particularly US jewellers, shrank. The
Japanese retail market also remains subdued although sales in Europe have risen modestly with the UK and France performing
particularly well.
The company which controls 65% of the world market is likely to resist price cuts by holding back the supply of diamonds.
Source Adapted from The Wall Street Journal
Questions
a) Write down a demand function for diamonds
b) Why would the markets in the United States and Japan be relevant to the sale of diamonds?
c) Draw a supply and demand diagram to illustrate the effect of the global slowdown on the diamond market if:
(i)
De Beers takes no action
(ii)
De Beers resists price cuts by holding back the supply of diamonds.