As we saw in the chapter opener, publicity about the health benefits of antioxidants in blueberries increased the demand for blueberries. In the short run, the supply of blueberries is inflexible because the number of bushes is fixed, and eager consumers competed for the limited supply, so prices increased. The price increased from $1.44 per pound in 2005 to a peak of $1.85 per pound in 2007. In the blueberry business, the long run is the few years it takes for newly planted bushes to begin producing marketable berries. As a result of higher prices in the short run, entry into the industry took the form of increased acreage of blueberries, which increased from about 49,000 acres in 2005 to almost 70,000 acres in 2010. Taking the long-run (5-year) perspective, the blueberry market has a relatively flat long-run supply curve, so an increase in demand doesn’t increase the price in the long run. Although many other factors affect blueberry prices (weather, imports, fluctuations in demand), the fact that the 2010 price equals the 2005 price is not a fluke, but illustrates the notion that the blueberry industry is roughly a constant-cost industry.

Question.

Why is the time path of market prices after an increase in demand?