Price+of+green+onions+shoots+up+by+I+Hyun

EXPLANATION OF THE ECONOMIC THEORY RELATED TO THE ARTICLE:
This article is talking about an increase in the price of green onions, which is a crucial agricultural product for many Chinese, and its effects on the Chinese population. The cause of this price can be rooted back to one of the determinants of supply, or the weather. The cold weather that has been persisting since winter and spring this year could have affected the growth and cultivation of green onions, which eventually caused the supply to decrease. There are different consequences for depending on what type of producer. In the wholesale market, since retailers (the consumers here) have an inelastic demand for green onions, the wholesalers would benefit from the increase in prices, as their revenue will increase. As shown in the graph, the revenue before was A+C but after it becomes A+B, which is much bigger. However, in the retail market, since consumers are the local Chinese people, the retailers (producers) will see a decrease in revenue. The graph shows here that the revenue before b+c is smaller than after (a+b). This is because, as one retailer said, “the amount I sold is less since many buyers give up or buy only one or two green onions after they've heard the price”. This means that consumers have a relatively inelastic demand for green onions because of the number of substitutes available such as garlic and onions. Many consumers are indeed complaining about the increase in prices and are resorting to cook with other vegetables. However, many people are saying that the price of onions will decrease again because the supply will soon increase when the weather will be warmer and spring onions will soon appear on market (see graph 5)

Market: where buyers and sellers come together to carry out an economic transaction Demand: quantity of a good or service that consumers are willing and able to purchase at all prices at a given time period Supply: The quantity of a good or service that producers are willing and able to produce at all prices at a given time period Price elasticity of demand: measure of how much the quantity demanded of a product changes when there is a change in the price of the product Inelastic demand: a change in the price of the product leads to a proportionally smaller change in the quantity demanded of it Revenue: income that a firm receives from selling its products, goods, and services, over a certain time period Subsidy: amount of money paid by the government to a firm, per unit of output Opportunity cost: the next best alternative foregone when an economic decision is made Law of demand: as the price of a product falls, the quantity demanded of the product will usually increase
 * VOCABULARY TERMS AND DEFINITIONS:**

Wholesale market (graph 1)
 * DIAGRAMS:**

Retail market (graph 2)


 * Subsidy for retail market (graph 3)**


 * Subsidy for wholesale market (graph 4)**

The price hike for green onions can be a burden to both consumers and producers (retail sellers). Although it is expected that the supply of green onions will increase when spring time comes, there are several ways that the government can interfere if things don’t go as expected or the government just wants to further help out with the green onions market since it’s an agricultural product. First, there are several ways to help the producers in the retail market. The government can provide a subsidy, which would increase the supply. As shown in the diagram, a subsidy will move the supply curve down, creating a new, lower price (P1). Because the government will pay for some of the costs of production for the firm, the producers will actually gain more revenue (blue part). However, the consumers will also see an increase in their total expenditure. This is because the demand for green onions are elastic, so the fall in expenditure due to price (pink) is smaller than the increase in expenditure due to increase in quantity demanded (purple). If the effect of the subsidy is illustrated on the wholesale market (which has an inelastic demand, producers are wholesalers and consumers are retailers), the govnernment can ultimately help the retailers too. As shown in the diagram, the expenditure of consumers will decrease because the demand for green onions are inelastic, so the fall in expenditure due to price (pink) is larger than the increase in expenditure due to increase in quantity demanded (purple). For both cases, however, the government needs to consider the opportunity cost of the subsidy; the money used could be used for other needs such as education, social policies and other essential goods. If the government also wants to help the consumers, they can do so by producing the green onions themselves. This will move the supply curve back right, decreasing the price of green onion. (Look at graph 5) This results in an increase in quantity demanded (explained by the law of demand), which means the retailers get to sell more and the consumers can buy more. However, there can be an opportunity cost to this because when the government directly produces the green onions, there are extra costs being involved which can be used for other needs. .
 * Increase in supply for green onions (graph 5)**
 * EVALUATION:**