Avocados are dropping in price great news for some, lousy for others

A recent drop in avocado prices may help relieve some of the guilt you feel about splurging on smashed avo on toast at a Sunday brunch when you ought to be saving money. Peak industry body Avocados Australia's online retail pricing report has listed the price of an avocado for about $1 each in major supermarket chains across the country. Chief executive John Tyas said there had been a significant increase in avocado production and supply, pushing prices down. "Compared with last year, we're going to [see] ... 65 per cent more Australian avocados harvested this year," he said. Tough market for growers While that was great news for consumers, it could mean problems for growers. Tim Keogh, owner of MMM Mangoes and Avocado's near Rockhampton in Central Queensland, said the increase in supply would hurt growers. "It's pretty tough at the moment in terms of price, just because of a huge supply that's come into the market," he said. "This season we've probably had the biggest crop we've ever had within our trees and I'm sure that's right across the board. "Everyone's having a big season." Mr Tyas said demand for avocados had not quite matched up with the sheer volume of product available this year. There were, he said, a few factors at play leading to reduced levels of demand: The pandemic had led to cafes and restaurants within the major cities periodically going into lockdown More people were choosing to eat at home There was generally a natural dip in the numbers of avocados consumed during cooler months

Q2 (a). Assume avocados are sold in a perfectly competitive market and firms are making zero economic profit. Explain and illustrate graphically, the effect of decrease in market price on the short run position of a single firm selling avocados.

Q2 (b). Based on the short run position identified in Q2 (a) explain and illustrate graphically effect of entry/exit on the long run position of the firm.