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Economic demand supply Essay

Based on the article titled “Argentine bread prices keep rising as grain scarcity kicks in” as my analysis topic regarding of change in supply or demand, changing in equilibrium. The article that I choose was from United Press International (PUP)’s website which is http://www. Pup. Com/ and it was published on Tuesday, October. 29, 2013. Based on the article, it shows that the price of bread increase due to the scarcity of wheat which is the main source of making bread.

Figure 1 Figure 1 shows that the E is initial market equilibrium, the equilibrium price is POP ND the equilibrium quantity is CO. Suppose that decrease in supply shifts the supply curve from SO to SSL . Given that the new supply curve SSL, the quantity supplied by producers at the initial market price POP decrease from CO to IQ . Because the quantity supplied by producers at POP is smaller than the quantity demanded by consumers at POP, a shortage develops at POP. The shortage cause consumer to bid up the market price. As market price increase, the quantity demanded, Sq, decrease along DO and the quantity supply, Sq, increase along SSL .

The quantity demanded, Sq entities to decrease

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and the quantity supplied, Sq, continues to increase until the shortage is eliminated and the quantity demanded equals the quantity supplied at Pl and IQ with the new equilibrium point El . Based on the Law of Supply one of the factor that shifted the supply curve is production and costs. When input of making bread expands, a firm’s production costs rise, therefore a higher price is needed to Justify the extra output and cover these extra costs of production because of the For commodities such as wheat, the effect of lunatic conditions can apply a great influence on market supply.

Unfavorable weather conditions will lead to a poorer harvest, lower yields and therefore a decrease in supply. Changes in weather condition can therefore have an effect on prices for agricultural goods such as wheat. Because these commodities are often used as ingredients in the production of other products, a change in the supply of one can affect the supply and price of another product. Higher wheat prices for example can lead to an increase in the price of bread as we see in the article.

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