Tuesday 29 April 2008
Full article: http://www.channelnewsasia.com/stories/afp_world_business/view/344427/1/.html
Summary
International organisations urged countries not to use food export bans to deal with global food crisis, saying these would only fuel inflation.
"Not good economic solutions in the short run"
"It is obvious such measures would result in a further increase in prices"
Review
As we all know, one of the main factors affecting supply is expecations. When farmers expect that the price of rice is going to increase, they would withhold their supply, and wait for market forces to push their prices up till their expectations before selling it.
However, such acts cannot be tolerated as it has caused the poor to be adversely affected. Therefore, I feel that the government should provide a subsidy, especially for the lower income group, or set a price ceiling. (less desirable)
Regards
Collin
P.S: Lets get cracking
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2 comments:
Hmm I think it's not only about expectations, but also other factors mentioned in the article such as "rising populations, strong demand from developing countries, increased cultivation of crops for biofuels and increasing floods and droughts", which is basically just increase in demand.
Thus, the price of food shoots up, since the supply can't be increased in the short run (supply is price inelasstic).
I agree with Collin that subsidies should be provided by the governments, especially for the lower income group, as they are the ones that are most adversely affected by the food crisis. But it will only work in the short run, as the subsidies will greatly deplete the national reserves and add pressure (due to increase in taxes to make up for the subsidies provided) to the rest of the society.
- Joelyn x)
Oh and below are some articles on rising rice prices to supplement reading (not really related to econs though):
http://news.bbc.co.uk/2/hi/science/nature/7347239.stm
http://news.bbc.co.uk/1/hi/world/south_asia/7365798.stm
http://www.chathamhouse.org.uk/files/11422_bp0408food.pdf
http://www.reuters.com/article/gc08/idUSL1890947220080424
http://www.guardian.co.uk/commentisfree/2008/apr/15/food.biofuels
http://www.washingtonpost.com/wp-dyn/content/article/2008/04/26/AR2008042602041_pf.html
- Joelyn x)
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