Forget about your potato cakes, crisps and hot chips, there is a shortage in our favourite vegetable. NSW is being hit the hardest, with heavy rain and cold winter months damaging our crops. Farmers say it’s the worst potato shortage in Australia’s history, and told Fairfax Media every state was impacted. “We probably just broke even,” potato farmer Anthony Failla said about the latest season. Potatoes are up to $9 a kilogram in major supermarkets and farmers are struggling just to put the vegetable on the shelves. It’s been a long food shortage too, with potatoes also in short supply last October. The potato industry was baked due to floods wiping out crops and wet grounds making it near impossible to plant more. There was a great potato famine in Ireland in 1845, and about a million people died. Don’t worry, that won’t happen here, but we will be very deprived of the starchy veggie. Thorpdale potato grower Des Jennings told news.com.au potatoes were selling for $2000 a tonne and “the growers who have potatoes are laughing”. These are prices growers have never seen before. By comparison, a crop Mr Jennings had in the middle of last year sold for $400 a tonne. People are getting seriously desperate to get their hands on potatoes and it’s uncertain when we’ll have our usual supply back. Mr Jennings said he’d need a crystal ball to predict when they’d be replenished but he thinks the famine might be broken early this year, which is good news. Potatoes Victoria chairman Frank Rovers said farmers couldn’t plant crops in July and August because it was so wet. “You end up with a window where nothing’s been planted for a period of time,” he told Fairfax Media. “Certainly there was a bit of a spike in price because the opportunity to plan wasn’t there but other growers compensated so there wasn’t a (major) shortage.” In 2010, there were 1.1 millions tonnes of potatoes in Australia and Victoria and Tasmania are the biggest potato production states. We eat 63kg of potatoes a year and we eat hot chips more than any other form of. Questions 1. Assuming potatoes are sold in a purely competitive market, use the supply and demand diagram to describe, ceteris paribus, a major factor contributing to the rise in the price of potatoes in Australia. In your discussion make sure to explain the process of moving to the new equilibrium output and price. How would this impact other markets in the industry? 2. Discuss whether you think the price elasticity of demand for potatoes to be elastic or inelastic. Based on your discussion of elasticity, illustrate and analyse the effect on total consumer expenditure in the potato market following the price rise. 3. Use the supply and demand diagram to explain the impact of the rising price of potatoes on two other markets affected by the potato market change and where the equilibrium outcomes are different. In your discussion specify your assumptions and explain the equilibrating process in the related market(s) in terms of the new equilibrium output and price and how they differ