Surging Food Prices

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Escalating prices for food are driving up the cost of groceries in the U.S., effecting consumers and companies. “Federal forecasters estimate retail food prices will rise as much as 3.5% this year, the biggest annual increase in three years, as drought in parts of the U.S. and other producing regions drives up prices for many agricultural goods” (Dreibus). For instance, “Drought in Brazil, the world's largest producer [in] coffee, sugar and oranges, has increased coffee prices, while dry weather in Southeast Asia has boosted prices for cooking oils such as palm oil” (Dreibus). Also, “In the U.S., much of the rise in the food cost comes from higher meat and dairy prices, due in part to tight cattle supplies after years of drought in states such as Texas and California and rising milk demand from fast-growing Asian countries” (Dreibus). Consumers and producers will take action to cope with these surging food prices under several economic principles. The first principle is the changes in demand due to the surging food prices. The law of demand states that the quantity demanded rises as price falls, and the quantity demanded falls as price rises; overall, this tells us the law of demand is an inverse relationship between price and quantity demanded (McConnell 66). However, the increased prices would not drastically make consumers to stop buying food because food is a necessity. They will just cut back a little on some goods or buy cheaper substitute goods, “a good that can be used in place of another good” (McConnell 68). This makes the demand drop for higher price substitutes and demand rise for lower price substitutes, which confirms the law of demand. For example, “Terri Weninger, a married mother of three in Waukesha, Wis., said... ... middle of paper ... effect because once a producer raises animal food prices, the producer who takes care of animals will need to cut down on animals or the animals will starve; since this producer need to cut down on animals, the meat he producers will rise to keep his profit due to decrease of supply. In conclusion, these principles of economics fully explain the consumer’s and procedure’s actions under surging food prices. Works Cited Dreibus, Tony, Leslie Josephs, and Julie Jargon. "Food Prices Surge as Drought Exacts a High Toll on Crops." The Wall Street Journal. Dow Jones & Company, Inc., 18 Mar 2014. Web. 31 Mar 2014. . McConnell, Campbell, Flynn Sean, and Brue Stanley.Principles of Microeconomics. Brief Edition. United States of America: The McGraw-Hill Companies, Inc., 2013. 3-163. Print.
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