UBC Theses and Dissertations
Economic analysis of blueberry investment in British Columbia Yang, Jinbin
The objective of this thesis is to examine reasons for boom-and-bust cycles of blueberries in British Columbia as a case study by performing financial analysis, estimating a price elasticity of blueberry supply, and simulating changes in the price and acreage of blueberries. In order to achieve the above stated objectives, three models will be constructed. First, a business planning spreadsheet model is constructed in order to analyze the profitability of blueberry investment in British Columbia. The model studies the profitability of blueberry production with high prices during the boom period and low prices during the bust period. The results demonstrate that farmers make fairly good returns on investment during times of high prices in the blueberry boom, while the returns in the bust period can barely cover their production costs. Second, the dynamic supply response model of Nerlove (1958) is adopted in order to estimate a reduced form supply function for blueberry producers in British Columbia. The results show that blueberry farmers had an inelastic response to price changes in the short run and a highly elastic response to price changes in the long run. These findings help to explain why the acreage of blueberries has rapidly expanded over the past decade. Third, on the basis of the estimated price elasticities of blueberry supply, the cobweb model is used in order to simulate boom-and-bust cycles in the price and acreage of blueberries. The simulation adopts the convergent type of cobweb because the demand elasticity of blueberries is expected to be elastic. The result of simulations indicates that the more elastic the demand curve is, the quicker the price and acreage of blueberries converge to a steady state.
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