Extreme Weather Drives Food Price Surges Across the Globe

EconEye Admin

1 year ago

A study led by the Barcelona Supercomputing Center links dozens of climate extremes to sharp food price rises. The study noted that in Japan, the price of rice rose 48 percent in September after an August heatwave across the region.—ft.com

Answer the following questions to check your understanding of the story.

Describe the market for rice in Japan before the sharp price rise.

a) Consumers were willing to buy less rice at the market price.

b) The market price was the equilibrium price.

c) Consumers couldn’t find the quantity of rice they wanted to buy.

d) Shops couldn’t sell the available quantity of rice.

Wrong! - If sellers can’t sell the available quantity of rice or if consumers are willing to buy less rice at the market price would the price of rice rise? If the price of rice increased sharply, was the market price at its equilibrium?

Well Done! - Before the sharp price rise, the quantity of rice demanded exceeded quantity supplied in Japan. There was a shortage of rice.

Describe the market for rice in Japan after to the sharp price rise.

Compared to the situation before the price change, ___________.

a) consumers, who are concerned about future price rises, buy more rice than they want to buy

b) rice is underproduced

c) shops sell more rice and consumers buy less rice

d) consumers buy less rice than they want to buy

Wrong! - With the sharp price rise, the market moves to its new equilibrium. What are the characteristics of a market in equilibrium?

That's Right! - When the price rises, the quantity of rice supplied increases and shops sell more rice. The quantity of rice demanded decreases and consumers buy less rice.

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