Why have avocados decreased in price when most other foods have seen a price increase?

• A. Consumer demand for avocados has dramatically decreased compared to other foods.
• B. There has been a significant increase in the supply of avocados due to favorable growing conditions.
• C. Avocados are less affected by inflation than other food products.
• D. Government subsidies for avocado farmers have been eliminated, lowering prices.

Answer: (B)

Verified step by step guidance

1. Step 1: Understand the basic economic principle that price changes are influenced by shifts in supply and demand. A decrease in price typically occurs when supply increases or demand decreases, holding other factors constant.
2. Step 2: Analyze the given options to identify which factor would cause a decrease in avocado prices. A significant increase in supply, such as from favorable growing conditions, would shift the supply curve to the right, leading to a lower equilibrium price.
3. Step 3: Contrast this with a decrease in consumer demand, which would also lower prices, but the problem states that demand for avocados has not decreased dramatically compared to other foods, so this is less likely the cause.
4. Step 4: Consider other options like inflation effects or government subsidies. Inflation generally raises prices, so avocados being less affected by inflation would not explain a price decrease relative to other foods. Eliminating subsidies usually increases costs and prices, not lowers them.
5. Step 5: Conclude that the most plausible explanation is the increase in supply due to favorable growing conditions, which shifts the supply curve rightward and results in a lower market price for avocados.