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Economics commentary

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Introduction

Economics Commentary - Rising food prices The rising food prices around the world are causing crises everywhere. Consumers are facing this because of the conditions of demand and conditions of supply are changing. Conditions of demand are when you consider the factors that cause an increase or a decrease in demand for a good or service. Conditions of supply are when a shift of the supply curve occurs when the price does not change but another variable does. This rise can be illustrated by the factors of price; signaling device- a rise in popularity of one good, increases demand will then outstrip supply at the current price - a shortage will exist and the price will rise. The rise in price acts as a signal for producers to put more factors of production into making food. ...read more.

Middle

so they can cover their cost. Since supply has decreased then there is an extension in demand. This would make the price increase and quantity demand would decrease. But overall from (Q1,P1) to (Q2,P2) price has increased and quantity demand has increased a bit. The article states that if the poor countries speed up investing on agriculture and more farmers come in the market, then they "will grow more grain for both fuel and food, and eventually bring prices down. This is an example of price acting as a signaling device for resource allocation. This is a long term solution that can take place. What is happening here is that farmers join the industry and so supply increases. There is an extension on the demand curve. ...read more.

Conclusion

This will hit hard on the poor countries like Tanzania. The article states "Tanzania are likely to be gripped with severe hunger crises" this shows that the government will have to do something for the country. The best way that they can do this is invest on agriculture and so farmers can bring down the food prices by producing more locally. This has been started in the developed counties as they have planted wheat; this is a long term strategy. But still consumers will "face at least 10 years of more expensive good", so the earlier the government can intervene, the less years of expensive food. The UN is facing a $500 million shortage in funding to feed 89 million people. Word Count: 749 ?? ?? ?? ?? ...read more.

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