Olive oil prices surge due to drought and disease in Spain and Italy

Olive oil prices surge due to drought and disease in Spain and ItalyOrder DescriptionInstructions to Students• There is one case study presented below, taken from the Financial Times, and followed by a number of questions. Attempt all questions. A total mark for the case study comes to 50 marks; therefore each mark is worth one percentage point towards your overall mark. (If you get 56% for the individual coursework, i.e. 28 marks out of 50, then 50% of 56% is 28%, and this is what will be added to your multiple choice mark after it is suitably adjusted for the 50% weighting.)• All diagrams MUST be drawn using Microsoft Word drawing facilities. You will be shown how to do this in the seminar class. No diagrams will be “copied and pasted”. Students who do this will lose many marks as a consequence. All diagrams must be fully labelled and properly explained in relation to the question.• There is no word limit for answering the questions below – quality is more important than quantity, but answers should be sufficiently in-depth so as to demonstrate an understanding of the economic concepts underpinning the question.• The answers must be done in Microsoft Word or another suitable text editor. No hand written coursework will be accepted. Use the Microsoft spell-checker in Word to check for spelling.• The reading indicated after each question will give the student the knowledge to assist him or her answer the question. But you must apply that knowledge. It will usually not simply be enough for the student to copy the information found in the relevant reading sections. Other economic textbooks can and should be consulted.Questions for Case Study (50 marks in total)1. The article speaks about the cost of the raw material (olives)a. Identify and briefly explain the key factors of production necessary in the production of olives. (3 marks)b. Given your answer to part a) above explain the significance, if any, of these factors of production in determining the price of olives. (3 marks)2. Explain and illustrate (via the use of demand diagrams) the key determinants of demand for olive oil. (Hint: Make sure you identify shifts or movements of the demand curve) and reach a conclusion as to which determinant of demand for olive oil you consider to be the most important (give reasons for your conclusion). (5 marks)3. Explain and illustrate (via the use of Supply diagrams) the key determinants of Supply of olive oil. (Hint: Make sure you identify shifts or movements of the Supply curve) and reach a conclusion as to which determinant of Supply for olive oil you consider to be the most important (give reasons for your conclusion). (5 marks)4. Define the concept of Price elasticity of demand and discuss the possibility that demand for olive oil is likely to be price inelastic. (5 marks)5. From your own general knowledge and knowledge of economic concepts:a. What are the main substitutes to olive oil? (2 marks)b. Olive oil is made from olives. Identify the key complements to olive oil. (2 marks)c. If the complement to olive oil goes up in price, will the cross-price elasticity of demand have a negative or positive sign? Explain by means of the formula for the cross-price elasticity of demand. (2 marks)6. Using supply and demand analysis explain and illustrate how the drought and disease in Spain and Italy have caused the equilibrium price of olive oil to increase. (6 marks)7. Explain why it can take up to a year for the increase in the price of olive oil to feed through to the final consumer. (5 marks)8. Given the increase in the price of olive oil what would you expect to happen to the supply of olive oil in :a. the short-run ( illustrate your answer referring to the concept of price elasticity of supply). Why might supply be inelastic in the short-run? (3 marks)b. the long-run ( illustrate your answer referring to the concept of price elasticity of supply). Why might supply be more elastic in the long-run? ( 3 marks)9. From the point of view of Greece explain and illustrate the effects of the drought and disease in Spain and Italy on the Greek olive oil industry identifying clearly the effects on Greek producers and consumers. ( 6 marks)

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