Scarcity of sugar and foods.
In this blog, readers can learn how actually Economics theory applied into the real world. You will actually find out what happened to our Economics and how these theories are linked. Have anyone of you ever wondered what will happen when a country is facing a shortage of foods? And there is unlimited demand for it. If this situation happens it means scarcity had taken place in the country for food. Scarcity it means there is unlimited wants of the demands with limited resources of supplied. In a country with a shortage of foods supplied, it will force the people to pay more or to give up something in order to get what’s really important to them with their limited resources. According to (Mishra, 2009) an article about “Why India is paying heavily for food”. In India, the citizen is facing scarcity of food because the population in India had risen approximately from 380million to 1.2 billion lately. Having this much of demand obviously the food production will not be able to cover the pace. The main causes of scarcity in India because of the uncontrollable growing of demand with limited size of land to produce food production. In order to overcome the problem, the government set a price floor for foods and ingredients by 50% increased to prevent them completely run out of food production. It must be set above the market equilibrium in order for it to run. When the price of food is this expensive the demand for it will reduce because not all people can afford it. This is when scarcity happens because the demands have to highly pay or gave up something in order to get the resources of food they want.
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| Image sources: http://images.travelpod.com/tw_slides/ta01/070/0ae/1152_12995244740-tpfil02aw-13641.jpg India shortage of foods |
Next, if we
compare to another country which is Malaysia. They are also facing shortage in
goods ingredient which is sugar. Back to 2010 Malaysian are facing biggest
crisis of shortage in sugar. According to The Star, a check at several grocery
shops has revealed that no sugar has been on sale for over a week (Dzulkifly, 2010).
In this article, there are various
complaints from Kuantan, Muar, Klang and Temerloh that there is no sugar
available for a week. Scarcity will involve in this case because of the
shortage occurred. Price will increase rapidly due to the high demand for
sugar. This will harshly affect most of the Malaysian who is running a
restaurant or food production. In this situation when the supply having
shortage, the demand for it will increases. Thus, the demand curve will shift
rightwards and the supply has to increase the price in order for them to meet
the equilibrium point. There are a few reasons about why scarce of sugar
happens. It is because of high costly of production and high tax would possibly
make the producer to decrease their ability to produce the goods. Generally
when the producer stops producing, the price of sugar in Malaysia will increase.
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| Image sources: http://sbhsgovecon.files.wordpress.com/2013/02/shortage-v-surplus-d-s-graph.gif?w=468 |
Demand is an amount of goods of products and services the customers are willing to purchase with a reasonable price. We should not be confused between change in demand curve and change in quantity demand because there is always a difference in this two. As we know in the term of economics the demand curve is always downwards sloping because as the quantity demand in demand curve moves towards the right it means more consumers will buy the products or services because there is a decrease in the prices (Refer to Diagram 1).
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Diagram 1: Increase in quantity demand from A to B
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In this world no matter where we go we will
always see a common things on the road which is cars. Each car are using large
amount of petrol to move it. Does it mean some country will face a shortage of
it? According to (Cavaliere, 2012) New York Daily News, no petrol for New
Yorkers after a week hit by a hurricane sandy. Sandy will end up with 20 billion in property
and $30 billion in business which includes petrol. The shortage of petrol in
New York was dragging for many days and many petrol stations were forced to
shut down. In the article there’s an employees from Shell station told the
Daily News that they did not have a single drop of gas to sell. When this
happened, some of the retailer will raise the price of the petrol. For example,
in this article it says that the price of each gallon of gas rises from $12 to
$18. From this we can see that the supplier will increase the prices to get
more profit when there is shortage petrol because of the highly demanded of it
and insufficient of products. The suppliers will have to do this in order for
them to meet the market equilibrium.This can be illustrated through Diagram 2.
No
matter how the prices changes, demand for it will still continuously increase
because petrol is an inelastic goods. Elasticity demand is a type of demand
that will increase or decrease according to the price of goods. For example, ice-cream
is an elastic demand. When the price of ice-cream is around RM 3 the demand for
it will be high in demand. However, when the same ice-cream goes up its price
to RM 5, most people would not buy it. Inelastic demand is the opposite for it.
Inelastic demand means people will still buy the goods no matter what the price
is. For example, in this article people are still willing to purchase the
petrol even thou the prices raises from $12 to $18 each gallon because they
know that they need it to travel. Besides that, they will also need petrol to
travel to another town after their home been sweep by the hurricane. Shortage
will continue for few days after the hurricane because most of the petrol will
be used to generate the electricity or water hydro pump. So basically, price of
petrol in New York will continuously increase till market for petrol is stable.
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| Image sources: http://0.tqn.com/d/economics/1/0/e/F/price-gouging-2.jpg |
Normally
after the sweep of hurricane, there will be no electricity supplied for the
whole area. Due to this whenever there is petrol available it will be used to
generate electricity. Besides that, they had spent $450 million to regain their
power supply to the demand. In order for the supply of electric generator to
recover their cost, they raise the price of electricity supplied to about $90
per month which risen by about 3% for three years just to cover those expenses
alone (Cardwell, 2012). Electricity is also inelastic goods because no matter
how much they increase the price, the demand for it will still be because
everyone needs it. In this period the electricity of supply tend to fall due to
limited of petrol supplied to the generator but it will increase when
everything is stable. Furthermore, hurricane Sandy’s aftermath had also affected
the housing and its price. Roughly $88 billion worth homes were sweep off by
the hurricane in the states. According to the article by, (Brennan, 2012) before
the hurricane came, the houses there were increasing in price with 11%
year-over-year and pending sales up to 14.5%. This rising numbers had made the
area to become a bright spot in recent real estate report. However, after the
hurricane sandy sweep along the east coast the home sales expect to be drop
tremendously. All the supplier of houses will be having surplus in their sales
because the demand will hold or stop buying new houses. Although millions of
people lost their houses but the demand for new houses will decrease due to
seller have to repair their damaged property from the market and this is large
enough to pull down the national sales statistics down starting from November. Interestingly,
the home prices tend to increase tremendously after few month of the hurricane.
This is the time when the supply of houses faces shortage because the
construction of new houses can’t pace up with the growing of population. To
overcome this shortage, the government should set a price floor above the
market equilibrium so not all people can afford the houses. However, for the
people who bought the house will have opportunities cost because they will have
a house to live and can avoid buying an expensive house in the future.
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| Image sources: http://www.catholicnewsagency.com/news/six-months-later-sandy-victims-plod-through-recovery/ Houses destroyed by Hurricane Sandy |
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| Image sources: http://cdn.theatlantic.com/static/infocus/sandy110112/s_s02_blackout.jpg |
Blackout of city without any electricity supplied.
Shortage of fuels after Hurricane Sandy.. Enjoy ^_^
Video sources: http://www.youtube.com/watch?v=W_yTLXqqbEA
References:
Brennan. M, (2012) How Hurricane Sandy’s Aftermath Will Affect The
Housing Market’s Recovery, 11 January [online]. Available from: http://www.forbes.com/sites/morganbrennan/2012/11/01/how-hurricane-sandy-will-affect-the-housing-markets-nascent-recovery/
[Accessed 8 June 2013].
Cardwell.
D, (2012) Hurricane sandy Alters Utilities’ Calculus on Upgrades, 28 December
[online]. Available from: http://www.nytimes.com/2012/12/29/business/hurricane-sandy-alters-utilities-calculus-on-upgrades.html?pagewanted=all
[Accessed 8 June 2013].
Choo.
Y. M, (2012) Malaysia Economic Transformation Advances Oil Palm Industry, 09
September [online]. Available from: http://www.aocs.org/Membership/FreeCover.cfm?itemnumber=18340 [Accessed 23 May 2013].
Dzulkifly.
S, (2010) Malaysian Consumers and Retailers Suffer Sugar Shortage, 07 June
[online]. Available from: http://news.malaysia.msn.com/regional/article.aspx?cp-documentid=4133183 [Accessed 23 May 2013].
Mishra.
S, (2009) Why India is Paying Heavily For Food, [online]. Available from: http://zeenews.india.com/FoodCrisis09/story.aspx?aid=561890 [Accessed 6 June 2013].
Notablesolution4u, (2012) Gas Shortage After
Hurricane Sandy. Youtube [video]. 23
December. Available from: http://www.youtube.com/watch?v=W_yTLXqqbEA
[Accessed 08 June 2013].
