KOLKATA|KOCHI: There is a preference for orange among the south Indian households this season. With apple and grape prices ruling high coupled with a loss of banana crop in Kerala, orange is the favourite fruit on the breakfast table among south Indians. Orange is selling at Rs40 per kg whereas banana, the commoner's fruit, is selling at Rs50-60 per kg, while apple is priced double that of orange.Talking to ET, Orange Growers Association of India working president Amol M Totey said, "Production of oranges in Nagpur has been very good and it has almost doubled this year. Huge demand has emerged from the southern part of the country."The sudden surge in demand from south India has been triggered by the rising prices of apples and grapes in southern part of the country. Demands for oranges are coming from places like Kerala, Hyderabad, Vizag, Bangalore and Chennai. In Kerala, banana plantations were damaged in the heavy rains during June and July, causing a shortage and rise in prices. Bananas which used to sell at Rs30-40 per kg in the past year are now retailing at Rs50 - 60 per kg.Arrivals of oranges have started in the southern markets. Usually the flow begins in October- November period and extends into the summer season. Nagpur and Amaravati in Maharashtra are the chief sources for Kerala, Chennai and Bangalore."The supply is definitely high this year but it hasn't been reflected on the prices as transport charges have gone up due to a hike in diesel prices,'' says Liaqat Ali, owner of AB Vegetables and Fruits in Chennai. Wholesale prices are around Rs35 per kg, almost the same as in the previous year.But Liaqat Ali feels it is still too early to predict supply and demand. "We have to wait till January-February when the demand goes up.'' The main market in Chennai gets about 150 tonne daily. The supply is likely to increase in the coming weeks. The boom in orange production is quite evident in Kerala. The supply points have increased. The retail prices are around Rs40 per kg. "The quality is good and there is a robust demand for oranges. Kochi main market gets 100 tonne daily,'' says wholesale trader K A Ashraf in Kochi.Apples sell at double the price of oranges with the prices of imported varieties going further up.Nazar Mohammed, a fruit wholesaler in Maharashtra's Kalamna market said "Till a few days ago, wholesale price of oranges were hovering around Rs14 -15 per kg but now it has gone up to Rs18 -22 per kg. Prices will again fall in January when fresh crop will arrive. Currently, harvesting is going on."(http://articles.economictimes.indiatimes.com/2013-12-19/news/45377538_1_oranges-diesel-prices-supply-and-demand)
- 3 products (oranges, apples and grapes, bananas)
- Factors (taste and preference = affecting the demand curve, weather= affecting the supply curve)
Figure 1: increase in price of Apples and Grapes
When the price of Apples and Grapes doubled, the quantity demanded of apples and grapes will decrease, ceteris paribus, leading to an upward movement along the demand curve. In conclusion, a change in the price leading to a change in the quantity demanded is shown by the movement along the demand curve, assuming ceteris paribus.
However, this increase in price of apples and grapes would lead to an increase in the demand of orange since orange is a substitute which can satisfy the same wants. This is because, assuming that the price of oranges remains unchanged, the price of apples and grapes has become relatively more expensive. Thus consumers would want to switch from eating apples and grapes to oranges.
However, this increase in price of apples and grapes would lead to an increase in the demand of orange since orange is a substitute which can satisfy the same wants. This is because, assuming that the price of oranges remains unchanged, the price of apples and grapes has become relatively more expensive. Thus consumers would want to switch from eating apples and grapes to oranges.
Figure 2: Increase in Demand of Oranges
When a consumer's taste and preference changes, the demand for the product which in this case is oranges, will increase.As shown in figure 2, at the initial equilibrium of E0, equilibrium price of P0 and equilibrium quantity is Q0.
As the quantity demand of oranges increases, the demand curve will shifts to the right from D0 to D1. At the initial price of P0, quantity demanded exceeds quantity supplied. There would be a shortage leading to an upward pressure on price.
There would be an upward movement along the supply curve (S0) as quantity supplied increases to satisfy the quantity demanded and this will eventually cause the price to increase from P0 to P1.
Figure 3: Decrease in Supply of Bananas
The banana plantations on the other hand were damaged in the heavy rains during June and July, there'll be a drastic decrease of bananas being harvested, hence leading to much lesser amount of distribution of bananas to the different cities, where prices for bananas will increase due to the low supply.
As shown in figure 3, at the initial equilibrium of E0, equilibrium price is P0 and equilibrium quantity is Q0.
When the supply curve shifts to the left from S0 to S1 due to the decrease in supply. At the initial equilibrium price of P0, quantity demanded exceeds quantity supplied. There would be a shortage leading to a upward pressure on price.
As price increases, there would be an upward movement on demand curve D0 as quantity demanded decreases.
As shown in figure 3, at the initial equilibrium of E0, equilibrium price is P0 and equilibrium quantity is Q0.
When the supply curve shifts to the left from S0 to S1 due to the decrease in supply. At the initial equilibrium price of P0, quantity demanded exceeds quantity supplied. There would be a shortage leading to a upward pressure on price.
As price increases, there would be an upward movement on demand curve D0 as quantity demanded decreases.
Hence,with oranges as the substitution of bananas, apples and grapes, and since oranges are more relatively cheaper, commoners are most likely to change to oranges as their commoner fruit for now.
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