I am stumped by the following problem: Illustrate the following with supply and

Question

I am stumped by the following problem:

Illustrate the following with supply and demand curves: Cranberry production in Massachusetts totaled 1.8 million barrels in 2004, a 28% increase from the previous year's production. This year's crop yield averaged 127.9 barrels per acre, an increase of over 30 barrels per acre from the 2003 crop. But demand increased by even more than supply, actually pushing 2004 prices above 2003.

Am I over thinking this problem as I don't understand the inclusion of "this year's crop yield averaged..." Am I graphing for 2003-04 data that is listed or someone showing "this year" as well? I just am overwhelmed by the various data in this problem.

I realize you may not be able to show the graph, but I need to know how to organize the data.

Explanation / Answer

the problem is not as tough as it may seem.

Let us go step by step taking each data points, once at a time.

Product: Cranberry

Location: Massachusetts

Production i.e. supply(2004) = 1.8 million barrels

Production i.e. supply(2003) = say x

x*(1+0.28) = 1.8 million barrels => x = 1.41 million barrels

Yield (2004) = 127.9 barrels per acre,

Yield (2003) = say y

y = 127.9 - 30 = 97.9 barrels per acre

Given Information: Increase in demand > increase in supply => price(2004) > price (2003)

Explaination: Prices are governed by demand and supply. Here you have been given information on supply i.e. the production of cranberry this year. From the demand side you just know that the demand has increased greater than the supply increase thus pushing the price of cranberry up.

Simple Rule: if supply > demand => price falls (consumers are willing to pay less for each unit of cranberry) ;
if supply < demand => price rises (consumers are willing to pay more for each unit of cranberry)

As with the yield number of the production per acre, it is simply a measure of the efficiency of per acre crop production and thus has nothing to do with the demand and supply of cranberry.  

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