Introduction to Microeconomics - Essay Example

Order 503582 Introduction to Microeconomics APEC ECN 19 February Global Food Demand and Recent Supply Crisis Owing to the betterment in living standards in fast-growing nations, the demand for food is continue to rise while more than just being lineup with the population growth. The demand of food is continuously shifting outward due to this determinant: rise in living standards with the population growth. This has boosted the food consumption globally, mainly throughout these fast-developing economies.

Yet, given the ‘specific’ level of food supply, this rightward shift in demand would raise equilibrium prices of food along with its equilibrium quantity. Although, the shift in demand can raise the quantity of food at any given prices, due to the present level of food supply, food prices would have to rise to let this ever-increasing food demand ‘make-up’ with the given supply-level. This making-up of food demand with supply describes upward (leftward) movement along the shifted (new­) demand curve, raising the equilibrium food prices.

Thus, equilibrium food quantity and prices are expected to rise, however, due to the upward movement along new demand curve, the increase in price would keep this increased equilibrium quantity lesser than the shift in demand. But what’s worsening the scenario is leftward shift in food supply which main determinants are unfavorable, volatile weather consequences including droughts, freezes, and floods in the main food producing and exporting countries: China, Russia, Australia, and Mexico. These unpleasant weather conditions have badly affected the crops and other productive resources, alarming the food production capacity in these countries.

Other harmful environmental changes i.e. global warming can further shift the food supply leftward. The long-term consequence of these changes is reduction in production capacity of the already lacking-in productive farmland needed to catch-up the continuously shifting food demand. All of these outcomes would shift supply leftward and decrease the equilibrium quantity of food while offsetting any increase in equilibrium quantity that might be possible with the shift in food demand. Although the fixed supply level might raise equilibrium quantity too (along with price), this leftward shift in supply would lead to further upward movement along the new demand curve thus further raising the equilibrium price to match the reduced global supply.

Accordingly, the non-matching shifts in food demand and supply would decrease its equilibrium quantity and increase equilibrium prices. Word Count: 370 words Information in the above essay has been extracted from the following news article. Is the World Producing Enough Food? Global food prices are soaring again, as droughts, freezes and floods have affected various crops in many parts of the world. At the same time, demand is rising with living standards in fast-growing countries. The price spikes are not as sharp as they were in 2008, but the new volatility reflects more than the sum of recent freakish weather "events," from severe droughts in China and Russia to floods in Australia to a deep freeze in Mexico.

Economists and scientists have identified longer-term changes -- from global warming to China's economic growth to a lack of productive farmland -- as the culprits. Is the world producing enough food -- specifically grain? Is this a continuation of the 2008 crisis, or something quite different? (The New York Times) Works Cited “Is the World Producing Enough Food?” Nytimes.com. The New York Times, 15 Feb. 2011. Web. 18 Feb. 2011.