Pg62

Case Study: The global supply of coconuts

1: The price elasticity of supply is the responsiveness of supply to a change in price

2: The supply of coconuts is likely to be inelastic this is because the tree is not at their best production
value for example “most coconut trees are grown in India and Southeast Asia and their tree are simply
past their best.”. This tells us supply is going to be inelastic because when there is a price increase the
change in supply will only be a small proportion change.

3: Why the price coconuts have sharply risen this is because usually for most inelastic supply good, since
it is hard to create more of, you will have to increase price to meet the rising demand. This is because in
2015 September price for coconut per ton was $1040 but in 2016 September the price used to all the
way $1550. This tells since there is an increase in quantity demanded and since supplier cannot increase
the supply, they must increase the price to reduce the demand.

4: The ability to store coconuts for long period of time will affect PES because it can be easier to respond
to price changes for example if coconuts pricing is low, some suppliers could hold the few in their
inventory and then when prices for coconuts start to rise due to excess demand then supplier could
bring use the coconut in their inventories.’
November 2010 Paper