Tomatoes!

Hi all, this is an impromptu attempt to come out with a worksheet to teach price elasticity of demand. YIKES!!
As you guys know that your test on Demand, Supple and Price Elasticity of Demand is just round the corner, I would very much like to start looking at the application and analysis on price elasticity of demand with this article on “Tomatoes”!
Please do me as well as you a favour by reading the following articles and try to answer the following questions. But of course, have your notes with you as you attempt those questions.

NB: You are strongly encouraged to download the article so that we can discuss in class.

Tomatoes: A star is grown
A national advertising campaign is set to begin promoting the humble fruit's virtues.
By TOM ZUCCO, Times Staff Writer
Published January 25, 2006

[Times photo: Bill Serne]
John M. Jack oversees tomatoes as they run through a vat of chlorinated water to be cleaned and sanitized at West Coast Tomato in Palmetto.


It's red, round, a little seedy, and as much as a fruit can be, about to become a national TV star.

For the first time in its 50-year history, the Florida Tomato Committee on Monday will begin a national ad campaign touting the virtues of the Florida tomato.
Four 15-second spots will repeat 600 times over the next 21/2 months on The Food Network, Discovery Health, DIY (Do It Yourself) and other cable channels. The $500,000 campaign is aimed at women age 25 to 54 and was developed by SenaReider, an ad agency based in San Francisco.

The ads are relatively simple, but not dull. One spot shows a picture of a stunningly plump tomato with a female voiceover:
"A whole tomato contains only five grams of carbs, no cholesterol, and was once thought to be an aphrodisiac.
"Fresh, Florida tomatoes.
"You're into that ... aren't you?"

Cute. But to Florida's nearly 125 commercial tomato growers, the messages have a deeper importance.

Virtually all the field-grown tomatoes in the United States sold from December through May each year come from Florida. For the entire year, the state accounts for about 1.5-billion pounds of tomatoes, or 50 percent of all of the domestically produced tomatoes sold in the country.

The 2004-05 hurricane seasons, however, put Florida tomato farmers in a pickle. The storms wiped out many fields and sent the price of tomatoes to triple in some cases. Some restaurants, including Wendy's, were forced to take tomatoes off their menus or make tomatoes available only upon request.

After each hurricane season passed, Florida growers replanted quickly and got their shipments into stores. However, this did not bring good news to the growers as prices started to fall. There was a tomato glut in 2004 and again last year. The price sank so low early last year it was cheaper for growers to let their tomatoes die on the vine than to pick, wash and ship them for sale. Farmers wound up donating more than 700,000 pounds of tomatoes, in part to draw attention to their surplus.

This is where the ad campaign comes in. The spots praise the fruit's succulence and health benefits, and also include much-needed handling messages. The ads are also designed to bring retailers into the campaign.

"It takes a little time," Samantha Winters, director of education and promotion for the Tomato Committee, said of the effort to inform the public. "We want people to know prices are coming down, the crop is here, and we're excited about this season.

"The tomato," she said, "is the big hero."


Questions:

1. Using demand and supply diagram, illustrate how the market for tomatoes was affected when hurricane hit Florida in 2004-05.
2. Explain why restaurants owners are either taking tomatoes off their menus or only serving upon requests?
3. Using the concept of price elasticity of demand, explain why the increase in the supply of tomatoes did not bring good news to the growers at all.
4. Explain the reason behind the Florida Tomato Committee’s decision of launching the ad campaign. How successful do you think this ad campaign will be in helping the tomato growers.