Global food prices are determined by market forces of supply and demand. Food prices increase when demand increases, due to factors like population growth, or supply decreases, due to issues like bad weather reducing crop yields. Government policies can also impact supply and demand and affect prices. For long term stability, governments should support developing countries' agricultural sectors to help farmers increase production and incomes.

1. Aaron Liew (SCM 020807)
Lee Kar Seong(SCM 020806)
Lee Huai Kai(SCM 021376)
Liu Zi Ran(SCM 019894)

2. Global food price determined by market through forces
of demand and supply where there is a group of
seller sells goods or services to buyers where there
is a potential for a transaction to occur in the
situation.
Food price increase due to changes in demand and
supply. Demand refers to the ability and willingness
to buy specific quantities of goods. Supply refers to
the ability and willingness to sell goods and services

3. Changes in demand occurs due to changes in consumer
taste, future price, income level, and some other
factors.
Figure above shows the changes of demand curve
which shift rightwards from D1 to D2
meanwhile the supply curve still
remain the same at S1.

4. When demand of food increased, affects the D shift to
rightwards from D0 to D1. New equilibrium point at
E1 when D1 intersect with S at price P1. Thus, the
equilibrium quantity increase from Q to Q1.
Therefore the equilibrium price increase to P1 and
equilibrium quantity increase to Q1.

5. 




Expectation
Populations
Taste and Trends
Festive Season
Government Policy

6. Consumer expectation regarding due to changes in
price.
 when P expect to drop soon, C will wait and buy
during the price fell.
 if P expect to raise in future, C will buy more before
the price increase.
For example, in autumn 2005, Hurricane Katrina
destroyed 113 offshore oil and gas platform. Before
this rumors, C decided to fill up their gas and oil
before the disaster happens.


7. 


The larger size of population, the higher demand for
goods.
when population increase, demand for food
increase.
Diagram above shows the increase of population
year by year and affects the demand of food
globally.

8. 

C are picky in terms of types
and style of goods.
however, the demand of goods
will slightly decrease after a
period time.
Diagram above shows that consumer starting to changes to
vegetarians.
The demand for meat getting lower and vegetable is increase.
In the nutshell, the demand for vegetable increase and the demand
curve of vegetable shift to rightwards.

9. Income level plays the major role for consumer to
purchase goods and services.
When income level of a consumer increase, the
demand for a normal good will increase. Cars, shirts
and so on.
As income level increases, the demand for an inferior
good will decrease. Used cars, low-grade rice.

10. 




Government plays important roles in tax and
subsidy system
When government reduce tax, the purchase power
of C increase
causes the demand for food increase
G apply subsidy on food to control the P of food
when the food P decrease, demand for food
increases.

11. 

Diagram shows the initial equilibrium of food price. E0 is the
equilibrium point when demand curve intersect with supply
curve DD=SS with initial equilibrium price P0 and quantity
Q1
When supply food decrease from Q1 to Q2 which supply
curve shift from S1 to S2. New equilibrium point at E1 when
DD intersect with SS2.The food price rise from P1 to P2.

12. 




Government Policy
Expected Future Price
Lack of Farmers
Environmental
Technology

13. 




G increase the tax in goods, causes the food
price to increase
Demand of foods will decrease due to tax
increase
Taxes discourage producers to produce extras
because it will increase the cost of production
Tax increase, price of foods has increased,
quantity of supply decreased
Supply curve shift to leftwards whereby price
increase and quantity of supply decrease

14. 


when producer expected the P of future food price
increase
they will keep an amount of current supply and keep
when the food price increase, producer release the
supply in a very high price to maximize profit
For example, when G announce there will be an
increase of price in sugar, suppliers will keep the
supply of sugar and sell in high price in the future to
gain maximum profit

15. 




the number of farmers decrease causes the supply of
food will decrease too
lack of farmers will causes no one will produce food
hence, the quantities of food are lesser and causes
the price to increase
the supply curve shift to leftwards
affects the price to increase and quantity of supply
decrease

16. 


Supply change due to cost of production
when the cost of production increases, the supply
will decrease
therefore, the supply curve will shift to leftwards
whereby price increases and quantity decrease
for example, when there is an increase in the wages of
labor and capital in production of cars
it will increase the cost of production and reduce the
supply of cars

17. 



technology plays important role in production to
produce goods or services
without technology it will affects the production of
food and decreases.
when there is lack of technology, the production of
foods will decrease
hence, the supply curve will shift to leftwards

18. 
Inflation

Increase In Money Supply

19. There are two types of inflation :
1) Cost-Push Inflation
2) Demand-Pull Inflation

20. 



Cost-push inflation refers to general price
increase due to the increase in cost of
production
It occurs when the price of input rises
When the price of input rises, producer will
reduce to generate output due to the cost of
production are high and increased
Hence, producer will reduce the supply and
the food price will increase as well

21. 



Demand-pull inflation refers to the general price
increase due to the increase in aggregate demand
(AD)
AD increase may cause by money supply
increase, investment, government spending and tax
reduction
In other words, when there is too much of money in
the market, the purchase power of household is
strong
Hence, it causes the AD curve shift rightwards and
affect the price increase

22. 




When there is increase in money supply, the interest
rate decreases
Interest rate decreases affect the investment to
increase
Causes national income to increase
When national income increases, the food price will
follow to increase according to market price
The increase of money supply will cause the AD to
increase

23. 
Income level




Low income farmers have to sell their crops through
intermediaries to earn some little profit
This is because they have small scale of farm
Meanwhile, in developed countries, farmer able to
produce crop in huge quantity in big scale and increase the
income for farmers
Standard of living


Farmers with low income and low purchasing power make
farmers hard to live and have to work hard to earn money
in order to burden on rising of food price
Farmers with high income and have enough purchase
power able to buy anything and allows living environment
gradually well and easy

24. 
Market place

In some poor countries, there are less farmers due to low
income level and not enough money to earn by selling
small scale of crops

In developed countries, there are more farmers due to the
demand and income level higher. This is because some
certain investor invest on the agricultural industry.

25. As a conclusion, global food price determined by
market through forces of demand and supply where
there is a group of seller sells goods or services to
buyers where there is a potential for a transaction to
occur in the situation.
Besides that, government should be more supportive in
developing agricultural sectors which help farmers
to get better income by giving subsidy in farmers
tools, sponsor machines and so on.

27. 



Food and Agriculture Organization (October 4, 2012) FAO Food
Price Index. Retrieved October 13, 2012 from
http://www.fao.org/worldfoodsituation/wfshome/foodpricesindex/en/
(Larry West, August 31, 2008) About.com How Hurricane Katrina
Threaten Offshore Drilling and the Environment. Retrieved from
http://environment.about.com/b/2008/08/31/hurricane-gustavhow-hurricanes-threaten-the-us-oil-and-gas-industry.htm
Reserve Bank of Australia (Image) (March, 2011) Retrieved
October 28, 2012 from
http://www.rba.gov.au/publications/bulletin/2011/mar/3.html
(Steve Odland, March 15, 2012) Forbes. Why Are Food Price So
High. Retrieved from 9 November 2012
http://www.forbes.com/sites/steveodland/2012/03/15/why-arefood-prices-so-high/

28. 


(Ron Nixon, October 4, 2012) Global Food Prices
on the Rise. Retrieved from
http://www.nytimes.com/2012/10/05/world/globalfood-prices-on-the-rise-united-nations-says.html
(Catholic Relief Services, n.d) Causes of the global
food crisis. Retrieved from
http://crs.org/public-policy/food-crisis-causes.cfm