ECON100 Economic Essentials for Business Assessment Task 2: Essay (20% of the final mark) Time allowed: 50 minutes. Essay to be completed in Week 8...

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This essay topic is based on a newspaper article covering the impact of Cyclone Yasi on Banana industry inAustralia in 2011.Article Source: http://www.smh.com.au/business/yasi-tipped-to-send-banana-prices-soaring-20110203-1aew8.html

Title: “Yasi tipped to send banana prices soaring” SMH on 3 February 2011 (article is attached on page 2)Note: Students are encouraged to undertake additional reading on this topic as part of their preparation towrite the essay.

Answer All Questions

1. (a) Using your knowledge of basic market structures, briefly explain the type of market into whichbanana growing industry in Australia falls (5 marks).(b) According to the article, “… banana prices soared as high as $15 a kilogram, against pre-cycloneprices of closer to $2 or $3 a kilo…”. Explain graphically why banana prices went up after the cyclone(25 marks).

2. On the basis of your answer to question 1 (a) above, show a theoretical model explaining the equilibriumposition (profit/loss situation) for an individual banana producer before the event (you may assume thatthe banana industry was in the long-run equilibrium before the cyclone) (20 marks).

3. Explain, using appropriate diagrams, the short-run effects of cyclone Yasi on the profitability of bananagrowing firm and the industry (impact of any cost/price changes should be clearly illustrated andexplained along with the assumption(s) you make) (30 marks).

4. How do you expect the Banana market to adjust in the long-run? (20 marks).