In about the mid-1840s Chicago began to emerge as the Market centre for farmers in the neighboring states. At harvest time, farmers converged on Chicago to sell their grain. There was so much grain, in fact that farmers often had to dump it into lake Michigan because there were simply not enough buyers. On the other hand, in spring, grain was in short supply. What did this do the price of grain Let’s look at the forces of the supply and demand to give us a clue.
As an example, take a look at what happens to the price of tomatoes in the summer. The same number of people want tomatoes in the winter as they do in the summer- there will be a need of tomatoes in salads, hamburgers and B.L.T.s all year round. Tomatoes grownoutdoors tend to ripen for harvest in July, August and September. In the summer, farmers have so many tomatoes to sell that they must lower their prices to get people to buy all of them. As you can see, the buyers have the upper hand. The farmers have excess supply- more than what is demanded in the market- hence prices would tend to fall.
What happens in the winter As you might imagine, tomatoes can’t be grown in the cold, so most are grown in Green-houses. You can’t grow nearly as many tomatoes in a greenhouse as you can on a large farm; therefore, there will be farless tomatoes brought to market in the winter- much less than people would like to have for their salads, hamburger and B.L.T.s. People hungry for tomatoes are now willing to spend more money to get their hands on some. Prices now begin to rise to the point where a lot of buyers drop out- tomatoes have become too expensive. The remaining buyers will purchase the tomatoes at a higher price,and all tomatoes probably will be sold. Do the farmers now have the upper hand They sure do ! Demand for tomatoes exceeded the supply, and when that happens,people will bid the prices up to get their hands on some. Now you can see why the price of just any thing has a lot to do with the supply and demand.
QUICK QUIZ # 1
Explain what would happen to the price of tomatoes under each of the following circumstances-
1) A severe drought in the growing season.
2) Highly unusual,sub freezing temperature in mid-June.
3) A report by the Surgeon General lonking tomatoes to an increased risk of having heart attacks.