Artem Skorobogatov

Mr. Jonathan Povey

2.1, .2.2 - Supply and Demand Upgrade

19th December, 2023

Ques on 1 - Explain how one possible demand factor and one possible supply factor might cause

an increase in world food prices.

Demand factors are various elements that a ect the demand for a product or service. They also

cause the demand curve to either shi to the le or right. Some examples of demand factors are:

price of the product or service, consumer income, popula on, consumer preferences and tastes,

and availability and prices of subs tute or complementary goods.

Supply factors are various elements that a ect the supply for a product or service. They also

cause the supply curve to either shi to the le or right. Some examples of supply factors are:

produc on costs, technological advancements, government regula ons, natural factors (such as

weather condi ons and natural disasters), and number of suppliers in the market.

One possible demand factor that would cause an increase in the world food prices is popula on

growth. An increase in popula on is followed by an increase in demand for food. Since the

number of people grew, more people have to split the same amount of food (assuming that the

produc on (supply) of food stayed the same). Therefore, the demand increases.

Figure 2. Increase in food prices - Supply

ti
ti
ti
ti
ti
ti
ft
ft
ff
ff
ft
ft
ti
ti
ti
 Figure 1. Increase in food prices - Demand

The graph indicates that a shi of the demand curve to the right will cause an increase in price

(assuming that the supply remains the same). The new equilibrium (Q1, P1) is set to the right of

the original equilibrium point (Qe, Pe) at a higher price. As more people require food, the demand

curve for food shi s to the right, causing prices to rise.

On the supply side, one possible factor that could cause an increase in world food prices are

natural condi ons. More speci cally, natural disasters, such as droughts, oods, or hurricanes.

These natural disasters act destruc vely on agriculture by destroying or damaging elds,

planta ons, etc., therefore, reducing the supply of food and crops. This shi s the supply curve to

the le , leading to a decrease in the quan ty of food available in the market. With reduced

supply and constant or increasing demand, prices tend to rise.

The graph indicates that that a shi in supply to the

le will cause an increase in price (assuming that the

demand remains the same). The new equilibrium (Q1,

P1) is set to the le of the original equilibrium point

(Qe, Pe) at a higher price. As less food is available, the

demand curve for food shi s to the le , causing the

prices to increase.

Figure 2. Increase in food prices - Supply

ft
ft
ti
ti
ft
ft
ft
ft
fi
ft
ti
ft
ti
fl
ft
fi