Question

1. Several factors are mentioned as contributing to disequilibrium in global food markets. Among them are emotions (panic), government restrictions on trade, the Malthusian specter of population growth outpacing food production, slowing productivity growth in the agricultural sector, rising incomes, and the production of ethanol. Which of these are supply factors and which are demand factors? How does each influence market price?

Answer 1

Demand factor:- Emotions (Panic), The Malthusian Spector of population growth outpacing food production, Rising income.

Supply factor:- Government restrictions on trade, Slowing productivity growth in the agricultural sector, Production of ethanol.

Panic on some commodity cretes a larger effect on the demand of the commodity. If panic creates then people will definitely avoid the commodity so the demand of the commodity will decrease. It will create excess supply situation so the price of the commodity will decrease.

Government restrictions on trade will decrease import so the domestic competition will decrease and the demand for domestic goods is also increase. So the Market price will increase.

Malthusian Spector of population growth outpacing food production meaning the production will not able to keep up growth i the human population. So the excess demand situation will arise market price of the commodity.

Slowing productivity growth in agricultural decrease the supply side so the excess demand situation will increase market price.

Rising income will increase the demand of the goods so shortage of supply situation arise. It will increase market price.

Production of ethanol has large effect on market price of food market. Production of ethanol decrease the prices of ethanol and the food market commodity.