Economic Concept And Theories

Running Head: ECONOMIC CONCEPTS AND

THEORIES 1

Economic Concept and Theories

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ECONOMIC CONCEPTS AND

THEORIES

Economic Concept and Theories

India tomato shortage causes curry crisis and puts sellers under pressure

At Pimpalgaon Basant, a village located in western India, there is no even a single cloud

in the sky. The last time it rained in this region was days ago, and it rained for only one hour. In

absence of rain, the Pimpalgaon tomato market, which is said to be the biggest in Asia, is almost

empty. The production of tomatoes has decreased rapidly.

Drought in India has hit the harvest of tomatoes, hurting the farmers of tomatoes

production, hiking prices of tomatoes, and forcing the consumers to use the substitutes of

tomatoes in cooking dishes such as curries. Production of tomatoes in India has been dominant

especially in some parts of India such as West India compared to other food crops, but this has

recently changed as a result of drought leading to low production of tomatoes in this areas.

Tomatoes in India are one of the most protective food crops. Due to the high production of

tomatoes, consumers were driven to these products impeccably.

The consumers’ demand function for tomatoes consist of use as a base for cooking

vegetables, curries etc, affordability as a result of cheap prices, good taste when used for cooking

vegetables and easiest way of cooking. Therefore has however changed recently as a result of

drought which has led to drastically increase in prices of tomatoes. Consumers have now been

forced to use the substitutes of tomatoes for cooking purposes such as curries etc. Many hotels

and restaurant has dropped tomatoes -based dishes from their menus and the sales of processed

tomatoes sauces have also gone up by 40%.

ECONOMIC CONCEPTS AND

THEORIES

Initially, the expenditure of purchasing tomatoes occupied very less in the total

expenditure of a homestead, the price elasticity of demand was less or remained less than, the

unitary elasticity of demand for tomatoes i.e. the demand was inelastic. The taste and preference

of tomatoes were also the non-pricing factor that contributed to inelastic demand. This has

however, changed recently as a result of drought. The price of tomatoes has risen by double the

usual price causing the demand for tomatoes to decrease. Consumers have opted to use

substitutes while hotels and restaurants have dropped tomatoes- based food in their menu. The

demand in this case is therefore elastic. The effect of this has hurt the farmers as a result of low

supplies.

price P

D D

Q Q

Elastic demand (PED >1) Perfectly elastic

Where p is price of tomatoes, q is quantities of tomatoes demanded, and D is demand for

tomatoes

Demand is said to be elastic if a change in price leads to a higher percentage change in

quantity demanded.

Resulting from an increase in prices of tomatoes, the demand for these tomatoes has

declined and as a result taxes imposed on tomatoes have increased as well. An increase in taxes

ECONOMIC CONCEPTS AND

THEORIES

has a negative impact to the producers and consumers. Increase in taxes has led to an increase the

prices of tomatoes even more which as a result have lead to a decrease in demand for tomatoes.

As a result of this, the number of buyers and sellers has declined in the market as a result

of high prices of tomatoes which has triggered low demand for the tomatoes. This has also lead

to a decrease in number of sellers of tomatoes in the market. This has led to the emergence of

monopolies in some parts of the market which has led to imperfect competition. This has also led

to the emergence of monopolies in different parts which has therefore, influenced the price of

tomatoes in the market. In some parts, perfect competition still prevails. We have some markets

offering identical products (tomatoes) and the number of buyers and sellers exist in number and

therefore in this markets price has not been interfered. Though prices are high, the pricing

mechanism is same for all.

Drought has completely hit production of tomatoes in India. India was ranked as the

number three highest in production of tomatoes in the world. Low production of tomatoes as

result of drought has a negative impact in the society. It has directly or indirectly led to an

increase in unemployment rate. Most of tomatoes based industries have been closed; more

farmers have withdrawn from production of tomatoes as a result of increased losses etc. Wages

on the other hand have decreased as a result low sales by producers and tomato- based

companies. Individuals who work in these experienced is a experiencing a huge wage cut.

This also has contributed to income inequality. It has led to emergence of different

classes of people i.e. high income earner and low income earners .Tomatoes production was

among the main sources of agriculture in India. Low production of tomatoes will therefore mean

increased poverty as most of people living in some of these regions where initially production

ECONOMIC CONCEPTS AND

THEORIES

depended on production of tomatoes to sustain themselves and their families. It is the

responsibility of the government and people in these regions to come up or embark on with

strategies to help fight drought and experience the initial years of high production of tomatoes.

ECONOMIC CONCEPTS AND

THEORIES

References

https://www.theguardian.com/global-development/2016/jun/29/india-tomato-shortage-causes-

curry-crisis-and-puts-sellers-under-pressure

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