A shift in the supply curve

Supermarkets in the UK are abandoning reliance on the price mechanism alone and have introduced rationing of lettuce. This is very unusual in the market economy, which can usually be relied upon to provide the goods and services you want at the prices you expect.

The reason for this move is the sudden fall in supply caused by poor weather conditions in Spain (a condition of supply). The graph below shows how this has affected the market.

The bad weather has called a fall in supply and so the market supply curve has shifted from S1 to S2. This has led to a rise in price from 40p to 1.40 as the market no clears at the point where the demand and supply curves cross.

Because lettuce is a primary product demand is inelastic (not very responsive) and the result is a very large rise in price following the reduction in supply. 

The UK supermarkets are now rationing lettuce to avoid even higher price rises. The shortage of lettuce is leading to panic buying. Consumers see lettuce and buy more than they need just in case there are none the next time they shop. This pushes the demand curve, D, to the right, forcing the market equilibrium even higher.

The actions of the supermarkets may seem unnecessary, but they are reacting based on their knowledge of consumer behaviour and market forces.

The Daily Mail covers the story here

This story has a lot of terms Year 11 will not currently understand, but they will soon. It has been written is an accessible way rather than a technical way. It is equally useful for IB and VCE students as it is about the basic market mechanism. IB students might search for similar stories from other sources in case they feel it is an IA candidate.