Organization and Market Economics

Homework – 1

1. How COVID has flattened prices, and shifted the demand curve for agricultural
commodities.

This article is an example of the case of the shift of the entire demand curve due to factors
like price, income, etc., It is not the usual ‘movement along the demand curve’ but a leftward
shift of the demand curve (QD of potatoes) due to the pandemic. The other factor apart from
the price that affected the quantity demanded of potatoes was a change in the overall
environment and food requirements i.e. lesser to no requirement of potatoes by hotels,
restaurants, streets, food joints, etc.,

“The last three years were bad when we could barely recover our production cost of roughly
Rs. 12 per kg, which includes Rs 115/bag (Rs. 2.3/kg) cold store expenses. When prices
touched Rs. 25/kg in End-December, we thought 2020 will be the year to recoup past losses.
The lockdown’s impact will be deergh kaleen (long-term), just like notebandi
(demonetization). Then, it was cash. Now, it is incomes that will take time to recover.”

Similar were the effects on the Quantity Demanded of Milk.

PFA link to the article: https://indianexpress.com/article/explained/how-covid-has-flattened-

prices-shifted-demand-curve-for-agri-commodities-6395733/

Graph for the shift in the demand curve, as per the article
 2. Demand falls as price hike forces consumers to go for smaller packs

This article is an example of the other usual case of ‘movement along the demand curve’. The
factor affecting the demand curve of FMCG goods is mainly price and follows the Law of
Demand.

Fast-moving consumer goods (FMCG) companies in May saw urban and rural demand
decline against April because consumers tempered purchases while firms focused on
increases in prices.

Sales in urban areas in May were down 16 percent and those in rural parts 16.6 percent
(against April), according to the data from Bizom. During the month, FMCG sales went
down 16.5 percent in value terms and active kirana growth was down 2.5 percent against
April.

PFA link to the article: https://www.business-standard.com/article/companies/demand-falls-

as-price-hike-forces-consumers-to-go-for-smaller-packs-122060400060_1.html

Graph for the movement along the demand curve, as per the article (Contraction of Demand)