Personal Commentary free essay sample

According to an article published in Dagens Nyheter, this is together with the growing population and poor weather the greatest reason for the increasing food prices. [pic] The size of the population is one of the factors affecting the demand, which is defined as the quantity of a good or a service that consumers are willing and able to purchase at a given price in a given time period. As the population of the world grows, so does the demand for food. Given that the price is raised it will become more favourable for producers to increase their supply, referring to the Law of Supply which states that â€Å"as the price of a product rises, the quantity supplied of the product will usually increase, ceteris paribus (all other things being equal)†. If the producers are able to increase their supply, the prices might decrease as Lennart Bage, President of the United Nations Fund for Agriculture Development (ISAD) states: â€Å"the prices might drop slightly when the access is rising due to demand†. We will write a custom essay sample on Personal Commentary or any similar topic specifically for you Do Not WasteYour Time HIRE WRITER Only 13.90 / page pic] With the opportunity of making a greater profit when supplying, many producers would probably like to increase their production as the prices on the market rises. This would move the supply curve to the right, from S to S1, lowering the price from P1 to P and thus reaching a new equilibrium at price P and quantity Q2, as seen in the diagram above. But due to poor weather and other factors affecting the agriculture, it might be hard to raise the supply. The use of transgenic or artificial fertilizer may simplify and increase the production, but considering our western world’s negative opinion towards these kinds of accommodations, it might be hard to carry out and to make profits. [pic] Another way of reducing the prices might be price controls. Often when it deals with basic food commodities, the government might interfere by setting a maximum price which is below the equilibrium price and prevents producers from raising the price above it. This will enable the poor to afford the food, but due to the change in price, the demand will shift to the right along the curve. As seen in the diagram above, there will now be an excess demand at price PMax, as the quantity supplied is Q while the quantity demanded is Q2. This excess is most appropriately solved by increasing the supply, shifting the supply curve to the right from S to S1, which is blue and crosshatched on the diagram in order to make it easier to imagine the situation without the S1 curve. Now a new equilibrium is reached at Pmax and Q2. Increasing the supply can be done by the government in several ways, for instance by offering subsidies to firms and industries producing the product, giving them an opportunity to increase their production. But according to Lennart Bage, many countries’ interest in subsidising agriculture has decreased the last 10-15 years and therefore the importance in increasing the supply must be clearly spread and understood. Even though our environment is of greatest importance, our living conditions are so too.