With all the talks about the border wall and stopping trade with Mexico, one of the foolish economic fallacies you'll see all over social media is that Americans won’t have access to their avocados. There’s an economic lesson here, but before I get into that I want to look at some of the stats on avocados. 

The avocado market won’t have too much of an impact on the economy; it’s just a subsector of a subsector of agriculture.  America and Mexico actually trade nearly $650 billion of goods per year, with the top import categories being vehicles, electrical machinery, machinery, optical and medical instruments, and mineral fuels like petroleum. That’s about $225B of $314B of annual imports. Fresh fruits, which includes avocados, is a total of $6B. So with an economy at $21T per year, the avocado market is chump change; a temporary avocado shortage or high prices won't cause damage to either side.

In America we eat about 2.4 billion pounds of avocado every year. About 80% comes from Mexico and the other 20% from California.  Other places provide the US with avocados, but not in nearly the quantity that these two places do. For example, Puerto Rico produces enough avocados for the tropical island’s inhabitants, and a surplus of about 1000 tons per year is exported to the States. The average American eats the equivalent of just 5 avocados per year, though some people each much more in just one week.

And that brings me to what I want to say about this awful meme on social media, that Americans won’t be able to eat any more avocados without Mexico unless they are willing to pay exorbitant prices and deal with extended shortages. There’s a spark of truth to that because Mexico represents 80% of the supply that we consume, but this spark won’t even light a match, let alone create a bonfire.

In economics there is a concept called the elasticity of demand, which is simply how demand for a product will change as the price changes. Essentially, the higher the price goes, the less the demand, and the lower the price the more the demand. The elasticity of demand generally matches a demand curve which slopes upward and to the right.

There are some items and services which have no elasticity and people will buy it no matter the price, with the classic example being water in the desert.  But there are better examples, like insulin injections for diabetics or antibiotics for a newborn baby with a strep infection. For these items the demand curve is a vertical line and so is the elasticity, because the quantity in demand (x-axis) is constant at any price (y-axis).

With a product like avocados, though, people will pay up to a certain price before they decide the price is too high. For some people that could be $1 each, for other it may be $2.50 each, and others it may be as high as $10 or more. When the price exceed what people are willing to pay, they’ll look for something else to substitute for the avocados.  Some people will do it consciously and some won’t. As it turns out though, a quick google search reveals there are several oils with a similar nutritional composition and/or cooking properties to avocado oil. And so too there are similar substitutes for the avocado itself for the nutritional value. Granted none of the substitutes taste like avocado, but the nutritional value is really what we’re after anyway.

One last point is that there’s a small anomaly here with certain luxury items that you’ll see less demand if the price is too cheap but it has the luxury brand name on it.  That anomaly is based on the perception that “even though it is from that luxury brand, it’s just too cheap and therefore something must be completely wrong with it.” That’s not the case with avocados though. We’re not interested here in that anomaly because most items, like avocados, are not luxury items.

In the end we may see higher prices and less available for a short period of time, but that anything significant will happen to the economy because of avocado trade with Mexico, that's just purely fake news.