Rise in price of rice

Recently, there is a rise in prices of rice and when people learnt about it, they rushed to supermarkets to stock up on rice (my mother did!!!). So, i will be reviewing on articles regarding this topic...
Well, the reviews might REALLY lack depth and touch only on simple concepts...



Article Title: Limited rice supply will force price rise: Philippine farmers

source: http://news.sg.msn.com/regional/article.aspx?cp-documentid=1308472

The reasons cited in the article for the rise in price of rice will be firstly, due to an expected lean harvest. Quote "prices were expected to soar amid an expected lean harvest next month".

Output will further decrease too since "farmers to put aside some of their harvests for personal consumptions, because they too will be hit by prices". As farmers expect prices to rice, some will want to hold back supply to sell and earn more in the future Also, they have to stock up so they themselves have sufficient food to last and not buy at high prices in the future.

The above reasons will lead to a leftward shift of the supply curve. As the demand curve of rice is inelastic (since it is a staple food or necessity), as the supply curve shifts left, a small drop in output will actually lead to a big rise in price.

Article Title: Hong Kong Rice Buyers Expect 30% Price Rise; Shoppers Stock Up

source: http://www.bloomberg.com/apps/news?pid=20601080&sid=a0wJbwZyemxs&refer=asia

The surge in price of rice can also be attributed to an increase in world population and urban encroachment of land, thus increasing demand and reducing supply. A decrease in supply and increase in demand leads to the rise in price. Then, as shoppers expect prices of rice to go up, they started stocking up lots of rice. The impact of this would only be to further shift the inelastic demand curve to the right, leading to a higher rise in price.

Hmm....i wonder if this is considered self-fulfilling prophecy....

that's all...




<3xin yi