Demand and Supply Analysis of Australian Organic Market

Question: Discuss about the Demand and Supply Analysis of Australian Organic Market. Answer: Introduction: The essay paper has been critically designed to discuss the relation between supply and demand of a product in order to fix the product pricing. Supply and demand can be identified as the fundamental of economics to determine the product pricing of a particular product in a given market. The term supply mainly delineates the quality of a particular product offered to the consumers in a specific market. Conversely, the demand for a product signifies the actual quality needed for market consumers (Hochwald, Davidson and Smolensky, 2015). Meanwhile, the theoretical concept of demand and supply can control the pricing of a product in any given marketplace. Fundamentally, if supply remains constant for a particular product and demand increases, the price of the product will surge in an automatic way. Also, if supply shortage of a product can be seen, the price of a product will also increase. The identified article has been taken into consideration to know more about the demand surge of organic food products in the Australian market and the impact of the surging demand in the product pricing (Hendy, 2012). The growing demand for organic food products and organic wine has created significant investment opportunities for many entrepreneurs. Moreover, the healthy food habits and lifestyle of the Australian public has driven the demand for organic foods, cosmetics and beverages to the next level. In the current market scenario, Australians have shown more interest in chemical-free food products, cosmetics and beverages in the recent time. According to a report published by the Biological Farmers of Australia (BFA), 60 percent of Australians have gone for organic products whereas in 2008, the percentage recorded was 40. The sudden surge in demand for the organic products has opened up new prospects for the agricultural industry. Under the existing circumstances, the current growth rate of organic market is mere 1%. Meanwhile, due to the outstanding demand formation, the BFA has predicted that the organic industry will grow by 3-5% by 2020 (Hendy, 2012). Such expansion of the organic market in the retail industry can deliver massive economic structure to deal with in the upcoming future. Herein, the major question to be asked whether the massive surge in demand for the organic product will increase the price of those goods or not (Aspris et al., 2013). Through the identificatio n of vast retailers and market consumers available in the Australian market, a prediction of future pricing will be evident. The expanding business dimensions of the organic industry are not restricted by investments or availability of resources. Moreover, the booming growth in organic food, cosmetics and beverage industry has not impacted the pricing too much (Ravindra and Iyer, 2014). It can be seen through recent study that the production of organic products has increased in the recent years that has made the products easily available in the market. Currently, the supermarkets have turned towards the growth of organic product section with easy availability of products that has kept the supply adequate in the market (Hendy, 2012). A figure has been presented below that shows how the production of organic products have increased in the recent years. Figure: Increase in Organic farming Source: (Dring, 2013) The current situation of demand and supply in the organic market of Australia can be explained with the help of the diagram given below. It can be seen from the figure that the demand of organic products is increasing that may lead to a rise in the price of the products (Halpin, Daugbjerg and Schvartzman, 2011). A shift can be seen in the demand curve from D to D1 that leads to an increase in the price from P to P1. But, in actual scenario, the supply is also increasing due to new ventures and easy availability of products that has led to a shift in the supply curve from S to S1 results in stabilising the price at P. Figure: Australian Organic Market Demand-Supply Source: (Conacher and Conacher, 2011) Hence, it can be seen from the above explanation that the price of organic products has not raised in the past years because of increasing supply of the product. Many new farmers have moved towards the cultivation of organic products (Lockeretz, 2007). Along with that, new brands of organic products have been introduced by several small entrepreneurs that increase the level of competition and keep the price controlled. It is expected that the demand for organic products will rise at a higher pace as compared to the quantity supplied (Newton, 2015). This is because of the scarcity of water resources in the nation. Along with that, the increase price of water and draught in the nation will impact the production of organic products. The demand will keep on rising that will impact the price of the products in the future. A graph has been presented below for better understanding. Figure: Demand Supply Curve Source: (Hochwald, Davidson and Smolensky, 2015) It can be seen from the above graph that the quantity demanded for organic products will increase in the future that will shift the demand curve from Demand before to Demand after. But, the supply will remain constant in the future. It will result in the rise of the price of organic products from P1 to P2 in the future. Hence, estimation shows that the organic market of Australia will evident a price hike in the future due to the higher rate of increase in the demand (Halpin, Daugbjerg and Schvartzman, 2011). The organic market in Australia has advanced in the best possible way carrying the most suitable performing categories such as food sector, cosmetics sector and wine industry. Moreover, the sustainable availability of the organic ingredients has controlled the pricing of the products in an efficient. Nevertheless, the surge in sudden demand from the target demographics of natural products can play a crucial role in the price range of the products. Though the organic products are priced at affordable price tags, in future the surge in demand can increase the costs. Conclusively, the stability in demand and supply of organic products has kept the prices in check in the Australia that can be changed in the future if the demand exceeds supply. References Aspris, A., Finch, N., Foley, S. and Meyer, Z. (2013). Fundamental-based Market Strategies.Australian Accounting Review, 23(4), pp.380-392. Conacher, J. and Conacher, A. (2011). 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