Explain two possible reasons, other than a change in income, for the rise in the price of food over the period shown

AS-Level Economics Specimen paper

Extract B (line 1) states that ‘In recent years, food prices have risen faster than incomes.’ Explain two possible reasons, other than a change in income, for the rise in the price of food over the period shown. (10 marks)

A market is a place where buyers and sellers meet to exchange goods and services. Equilibrium price is where demand meets supply. Equilibrium price would change in a free market due to a right shift in demand or a left shift in supply.

One reason for an increase in price could be an increase in population (line 9, extract B). An increase in the population means that there would be an increase in the amount of food that people are willing and able to buy at each price, and this can be illustrated by a right shift in the demand curve for food. This causes the market to move to a new equilibrium at a higher price (p2), and this also causes an expansion in supply meaning that there is an increase in the equilibrium level of output to q2, due to firms expanding output as they are motivated to make higher levels of profit due to the higher market price.

Another reason for an increase in the price of food could be climate change (extract B, line 8). Changes in the weather is one of the factors that can affect the supply curve. Supply is the number of goods and services (food in this case) that firms are willing and able to sell at each given price. Bad weather makes it more difficult for farmers or businesses to grow food. Therefore, productivity falls meaning that less food can be produced per hour. Therefore, at each given price, there would be a decrease in the supply of food on the market. The diagram shows that a decrease in supply causes the market to move to a new equilibrium. There is an increase in the equilibrium price from p1 to p2. This would also cause a contraction along the demand curve, causing the market equilibrium output to fall to q2.

A-Level Economics Tutoring

I offer one-to-one and small group A-Level Economics tutoring for students across the UK and internationally. With 87+ five-star Google reviews and tutoring experience since 2017, I specialise in helping students understand difficult concepts and improve their exam technique.