Food Price Shock

In the article “The 10 Fastest Rising Food Prices” Alexander Hess and Thomas Frohlich listed the 10 foods in the United States with the fastest growing price change and examines the factors that might have caused this change in price. The food contenders range from oranges to bacon, and there are several reason why the prices of these foods are rising tremendously. In this essay, I will illustrate why this fits “the principle of market equilibrium”. In lecture, we have discussed market equilibrium as a time when the supply for a product is exactly equal to its demand, and when there is an imbalance between supply and demand, the economy will naturally gravitate towards the equilibrium price where the market will be most efficient.

In the article, the authors see weather as one of the main issues that cause the surge in price. Lately, California and many Midwestern states have experienced dry climate, affecting the sustainability of water supply, and causing a decrease in crop yields and the supply of meat. For instance, corn and soy based products are what turkey consume in its diet, and because of the drought in recent years, the price of corn and soybeans have soared. As a result, the price of turkey has also went up by 24% in the last four years. According the the principle of market equilibrium, the supply curve will shift to the left because higher production cost leads to a decrease in producer’s willingness to supply at any given price. The law of demand also says that a higher price for a good, ceteris paribus, leads people to demand a smaller quantity of that good. However, because producers are willing to supply less, there will be a shortage in the market. In this situation, and producers will slowly supply more and more until the curve reaches market equilibrium again.

Disease is another key factor that contribute to the hyperinflated price of meats and fruits. At number ten on the list, the grapefruit crop is expected to yield