The article below refers to the orange market in South India. Use the demand- supply model and

economic reasoning to analyse the changes in the orange prices described in this article.

Start your analysis by providing a general description of the demand-supply model along with its basic

characteristics. Next, provide the reasons for which this model is appropriate for the analysis of this

specific market. Finally, use the model to analyse the changes in the orange prices described in the

article.

With costly bananas, apples and grapes, orange becomes favourite fruit this season

By Sutanuka Ghosal & PK Krishnakumar, ET Bureau

There is a preference for orange among the south Indian households this season. With apple and

grape prices ruling high coupled with a loss of banana crop in Kerala, orange is the favourite fruit on

the breakfast table among south Indians. Orange is selling at Rs40 per kg whereas banana, the

commoner's fruit, is selling at Rs50-60 per kg, while apple is priced double that of orange. Talking to

ET, Orange Growers Association of India working President Amol M Totey said, "Production of oranges

in Nagpur has been very good and it has almost doubled this year. Huge demand has emerged from

the southern part of the country." The sudden surge in demand from south India has been triggered

by the rising prices of apples and grapes in southern part of the country. Demand for oranges is

coming from places like Kerala, Hyderabad, Vizag, Bangalore, and Chennai. In Kerala, banana

plantations were damaged in the heavy rains during June and July, causing a shortage and rise in

prices. Bananas which used to sell at Rs30-40 per kg in the past year are now retailing at Rs50 - 60 per

kg. Arrivals of oranges have started in the southern markets. Usually the flow begins in October-

November period and extends into the summer season. Nagpur and Amaravati in Maharashtra are the

chief sources for Kerala, Chennai, and Bangalore. "The supply is definitely high this year, but it hasn't

been reflected on the prices as transport charges have gone up due to a hike in diesel prices,'' says

Liaqat Ali, owner of AB Vegetables and Fruits in Chennai. Wholesale prices are around Rs35 per kg,

almost the same as in the previous year. But Liaqat Ali feels it is still too early to predict supply and

demand. "We have to wait till January-February when the demand goes up.''

The main market in Chennai gets about 150 tonnes daily. The supply is likely to increase in the coming

weeks. The boom in orange production is quite evident in Kerala. The supply points have increased.

The retail prices are around Rs40 per kg. "The quality is good and there is a robust demand for

oranges. Kochi main market gets 100 tonnes daily,'' says wholesale trader K A Ashraf in Kochi. Apples

sell at double the price of oranges with the prices of imported varieties going further up. Nazar

Mohammed, a fruit wholesaler in Maharashtra's Kalamna market said "Till a few days ago, wholesale

price of oranges was hovering around Rs14 -15 per kg but now it has gone up to Rs18 -22 per kg.

Prices will again fall in January when fresh crop will arrive. Currently, harvesting is going on." Is the market type perfect competetion and elastic as its a homogeneous

product ?