🚀 go-pugleaf

On Tue, 27 Mar 2001 22:56:43 GMT, X Metro Man <pdcorc@excite.com>
wrote:

>The law of supply and demand does not also work when looking at the
>links between producer and consumer.  Case in point: While wholesale
>cranberry prices have plummetted from $80 to $10 a bushel over the
>past several years, retail prices have remained high and consumer
>demand, naturally, has remained low.  Of course, watch what happens at
>the retail level if wholesale prices even reach half their former
>peak.

Wrong-o Metro-dude.  Your assertion assumes that sell price is a
function of production cost.  It most certainly is not.  Unless you're
in a nearly perfect competitive market (which is not the case here)
this is not the way it works.  

The supply-demand curves a producer faces are separate on the
purchased material side and on the finished product side.  Therefore,
facing a glut on the raw cranberry market, juice producers will
certainly pay a much lower price for cranberries, markedly so because
of the relatively fixed demand for cranberries.  IOW, small changes in
cranberry supply tend to cause fairly large changes in price paid for
raw cranberries.  This is because of the relatively fixed demand for
finished cranberry products, which, in the face of relatively fixed
processing capacity, results in fairly stable finished product prices.


SteveR
s.r.r.2 a.t w.i.n.s.o.c.k.e.t d.o.t c.o.m