Chapter 3: Problem 8

A severe drought in California has resulted in a nearly 30 percent reduction in the quantity of citrus grown and produced in California. Explain what effect this event might have on the Florida citrus market.

Short Answer

Expert verified

Answer: The severe drought in California, causing a 30% reduction in citrus production, could potentially have a positive impact on the Florida citrus market. The decrease in California citrus supply may result in an increased demand for Florida citrus, as consumers and retailers look for alternative sources. This could lead to higher prices for Florida citrus and subsequently, higher revenues for Florida citrus growers.

Step by step solution

Identify the factors influencing the Florida citrus market

The Florida citrus market can be influenced by factors such as supply, demand, and prices. The reduction in California citrus production might affect these factors in the market.

Describe the effect on demand and supply of citrus in California

A 30 percent reduction in the production of citrus in California would lead to a decrease in the supply of citrus in the market. As a result, the demand for citrus might increase since there is less available to meet the needs of consumers.

Understand the connection between California and Florida citrus markets

Since California and Florida are two major citrus-producing states in the US, they both contribute to the US citrus market. When one of these markets experiences a change in supply or demand, it is likely that the other market will be affected as well.

Explain the potential effect on the Florida citrus market

The reduced supply of California citrus might result in an increase in demand for Florida citrus as consumers and retailers look for alternative sources of citrus. This increase in demand for Florida citrus could lead to a rise in the prices of Florida citrus, as the market attempts to balance the higher demand and stabilize prices. This could then result in higher revenues for Florida citrus growers, as they are able to sell their products at higher prices.

Summarize the potential effects of the California drought on the Florida citrus market

In conclusion, the severe drought in California, which has caused a 30 percent reduction in the quantity of citrus grown and produced, may have a positive effect on the Florida citrus market. Due to the decreased supply in California, the demand and prices for Florida citrus could potentially increase, leading to higher revenues for Florida citrus growers.