How weather can affect food prices Diagram 1 – supply and demand: P= Price Q= Quantity D = Demand S= Supply Q? , P? = Original equilibrium Q? , P? = New equilibrium Diagram The main factor that I will focus on in this price shift is the weather. That is because the weather is one of the most important factors when it comes to agriculture. As you can see in the diagram above; when the supply decreases there will be a lack of food (shortage) which will result in enormous price risings.
But one important thing to notice is that the demand is slightly decreased.This is because food is inelastic. What inelasticity means is: “When a price change has no effect on the supply and demand of a good or service, it is considered perfectly inelastic. An example of perfectly inelastic demand would be a life saving drug that people will pay any price to obtain. Even if the price of the drug were to increase dramatically, the quantity demanded would remain the same” . Evaluation One thing to have in mind is that there is always billions of other factors that effects the prices of food, not just the weather.A few other factors are – but not limited to – the rising prices of oil and transport, the lowered production  of grain, the increase of the world population and the production of ethanol .
All these factors have together caused the price of corn to double in the past year, the price of wheat has been increased by 70% and the price of soybeans has been increased by 50% . Just to point out, there will not be a winner in neither the short nor the long run of the food crisis – this applies to everyone; governments, companies, stakeholders etc. How does this affect people around the world today?We, westerners, who live our rich lives will not be affected by the raising prices other than that we will complain a bit while shopping in our air conditioned superstores. But on the other part of the world where people already live in poverty and spend the majority of their income on food there will be a crisis. This may result in similar food riots that occurred in year 2007 and 2008 .
And because of this food crisis, about 44 million people have been pushed into poverty in the past seven months, according to the world bank . What will happen in the future? According to a United Nations report; the general food prices are set to rise as much as 40% over the coming decade because of the growing demand from emerging markets and for biofuel production. The report warns us about rising hunger, food insecurity, the prices for vegetable oils are expected to increase more than 40% and an increase between 15 and 40 percent of the prices for wheat and coarse grain over the next ten years. Summary The summary of all this is that food is a inelastic necessity that we will always need to survive, and that we will always keep paying for it, no matter what (which you can see by looking at the diagram).
And with the continuing shortage of food we will have to find a way to grow food in a more efficient way. And the consequences of the shortage is poverty and dead amongst the developing parts of the world, but of course it will affect us too – just not as hard and lethal.References 1. http://www. investopedia. com/terms/e/inelastic.
asp 2. http://www. truth-out. org/rising-prices-changing-climate67967 3.
http://www. technologyreview. com/energy/18173/ 4. http://www.
fox2now. com/news/ktvi-us-food-prices-oil-mid-east-china-india-022111,0,3465470. story 5.