Elasticity of Pecan Market

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The article “Big Crop Won’t Reduce Pecan Prices” is about how the market for pecans affects the both the wholesale market and the retail market. The article describes how pecans are relatively inelastic around major holidays, such as Thanksgiving and Christmas. It is stated that there was a 150 million pound increase in pecans from the previous year. Since there was such a great increase in quantity supplied, the price decreased. Since the demand for pecans is relatively inelastic, consumers are not affected by a change in price. This article also describes the difference between the wholesale market and the retail market for pecans. Wholesale markets produce the pecans, and sell them to retailers for a low price; between seventy-five to eighty-five cents per pound. While the retailers purchase the pecans for a low price, they turn around and sell them to consumers for about five times the price they paid for them. The pecan producers have no control over the prices that they sell the pecans at, and they have no control over the price that the retailers sell the pecans at.
The wholesale pecan market is a perfectly competitive market. There are lots of different suppliers, and it’s a highly standardized product. The demand and supply curves are relatively inelastic due to the craze for pecans during the holidays. The massive increase in pecans supplied causes the price per pound of pecans to decrease greatly. The graph (on the left) represents the increase in demand.

The graph above and off to the right represents the demand and marginal cost for a firm. In the retail market, they have control over the price at which they sell their products to consumers. In the article they state that the firms buy the pecans from wholesale markets for a small price, like eighty-five cents, and then they go off and sell the same pecans for $5.50. A decrease in the price causes a decrease in marginal cost.
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