Supply, Demand, and Price Elasticity

1060 Words Sep 15th, 2010 5 Pages
Supply, Demand, and Price Elasticity Paper – Rice.
ECO / 212: Principle of Economics
Week 2 Learning Team Assignment

With the growing cultural diversity in the San Francisco bay area, it is hard not to notice the Asian cuisines and restaurants in every corner of the block. Asian food had become a natural substitution choice for the American fast food; and rice, is the perfect substitution for wheat and flour. Rice is the seed of the monocot plant “Oryza sativa”. As a cereal grain, it is the most important staple food for a large part of the world 's human population, especially in East and South Asia, the Middle East, Latin America, and the West Indies. It is the grain with the second-highest worldwide production after corn. In this
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Rice is considered to be a Griffin good. Griffin goods are inferior goods which have an upward sloping demand curve. The income effect is greater than the substitution effect. Normally with inferior goods, the income effect will cause the consumers to demand less of a good. The substitution of rice as the cost decreases, are other foods which are not normally available to poor consumers. If the cost of rise is lower, the consumer buys less and spends his or her additional income on foods which are preferable but not as affordable (Hubbard, & O’Brien, 2010). Insulin, however, would not show the same results as rice. Insulin, as a necessity, would keep the same demand if the price lowered or increased. If the cost of insulin decreased then it is likely to see an income effect for other goods purchased by diabetic consumers. The consumer would in a sense, have an increase of income. If the cost of the insulin increased the consumer demand would still remain the same but would need to decrease the demand for other goods. Next time when we go to an Asian restaurant and decided to have a rice dish, stop for a second and think about these questions; is the current world supply enough to fulfill the demand? Is the supply of grain and corn affecting the current price? What will the price be if there are shortage of supply and surplus of demand and how that would affect the
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