Friday, October 17, 2008

Japan Has A Banana Shortage And Guess What Happened?

You can read all about it here Japan Goes Bananas For New Diet. It seems that there is a new fad diet where you eat bananas in the morning. Something about increasing your metabolism. So banana imports are up 25%. It is hard to buy bananas after 12 noon since they sell out so fast. But this increase in demand (caused by an increase in tastes) has also lead to a 20% increase in the price (maybe that means that the price elasticity of supply is 25/20 = 1.25, so supply is somewhat flat and then quantity supplied is fairly responsive to changes in price). But why don't the sellers raise the price even more if they are running out so fast? It seems like price might still have room to increase and end up at a higher equilibrium. Maybe the sellers are just always playing catch up and this fad caught them by surpise.

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