Commodity prices, scarcity, buffer stocks...

Week one in economics is all the basic economic problem; unlimited wants and infinite needs; Scarcity. As the term progresses thoughts of scarcity are put aside as we cover concepts such as elasticity and market failure. As you prepare for Unit 1 it is important to re-visit the idea of the basic economic problem.

The price of wheat has risen dramatically over the past two years as shown here. 

In the exam you will need to be able to explain the causes, effects and solutions of this rise in price…Remember prices rises are a result of demand and supply side issues. Growing populations and extreme weather conditions have all played their part. Read this article here to find out about the causes of rising food prices.

Impact of rising food prices

Examiners like to ask you about the impacts of rising prices.
These videos here will give you some ideas.

Video 1

Video 2

Video 3

Solutions

Now you know all about the impacts have a think about what would be the solutions..

Would buffer stocks work? Is CAP the best solution? Import Controls? 

Have a look at this video for some ideas 

Tasks:

1. Draw  a demand and supply diagram explaining why the price of wheat has increased 
   (6 marks)

2. Evaluate the impact of rising wheat prices on the following groups (14 marks)

   a) Farmers (producers)

   b) Manufacturers

   c) Consumers

3. Evaluate the use of a buffer stock system to solve the problem (14 marks)

4. Explain why buffer stocks can be considered to be a case of government failure 
(12 marks)

You can put your answers in essay format or you can work in pairs to complete a presentation.