Do you ever know what do economic study? Economics is the science that studies how public and societies make decisions that enable them to get the most out of their inadequate resources. The economics is literally everywhere because of every nation, every industry, and every individual has to deal with restriction and limitations (McTggart, 2010). Economics are divided into two categories macroeconomic and microeconomics. In the microeconomics, it shows the performance of individual buyers, seller and businesses. It also studies on how individuals, households, and producer make judgments to distribute limited resources, usually in markets where goods or services are being purchased and traded. In addition microeconomics determines how these decision and behavior imitate the supply and demand for goods and services (sciencedaily.com).

All the resources that available for manufacturing goods and services are scare in relation to the various wants in society. On account of the problem of restricted resources and unconstrained wants the problem of scarcity happens (Parkin, 2012). The US maize harvest is facing the problem of grains shortage. According to John Vidal, he mentions that the maize harvest had decline by 15% in 2012 due to the three months heat wave and drought. If the climate issue continues happen, the food supplies will be affected. When the maize harvest decline, the firms are trying to find for other possible goods to produce is known as opportunity cost. The opportunity cost of this article is vehicle fuel. From the article, there are nearly 40% of the firm had shift to make vehicle fuel which will result in lesser food in the market. There is one third of the grain produce in 2011 went to make vehicle fuel. The production possibility curve shows the maximum possible of two goods such as grain and vehicle fuel that can produce within a specific time period and limited amount of resources (Vidal, 2012). From the graph, the firm is producing 133 million units of vehicle fuel and 268 million of grain at point A. If they try to produce more vehicle fuel, there will be a movement on the curve from the production of grain to vehicle fuel. The firm would have to give up 133 million units of grain to gain 133 million units of vehicle fuel in order to reach point B. Thus the opportunity cost of 133 million units of vehicle fuel is 133 million of grain. As a result, a movement downs the vertical axis there will be a given amount of grains sacrificed gains lesser and lesser amount of vehicle fuel. This is because as the firm focuses more and more on the production of vehicle fuel, it starts using the resources that are less and less suitable for grains and the product possibility curve bowed outward.

Demand for goods is defined as the need for certain good or service sustained by the ability to purchase it (businessdictionary.com).The amount that buyers plan to spend during a given stretch of time at a particular price is known as the quantity demanded of a good and service. The Law of Demand states that ceteris paribus which is assuming all the other things remain unchanged, there will be a reverse relationship between the quantity demanded and price. A demand curve shows the relationship between the quantity demanded of a good and its price when all other factors on consumers plan purchases remain the same. A change in demand refers to the circumstance that affects purchasing plans other than the price of good itself (McTggart, 2010). Market equilibrium happens in a market when all consumers and producers are satisfied with their relevant quantities at the market price. The equilibrium price is the amount at which the quantity demanded meets the quantity supplied. While the amount purchased and traded at the equilibrium price is the equilibrium quantity. The changes of the determinant of demand other than the price of the goods itself will affect the whole demand curve to shift to right or even left. For example, when there is an increase in the determinant of demand such as population, the demand for food will increase and the demand curve will shift to the right. In the diagram, the demand curve had shifted to the right from D1 to D2 as the population and demand for food increases. There will be a shortage between point A and B at the original price, P1. The consumer will be agreeing to pay more and alter the price to increase. There will be a movement up the new demand curve from point B to C as the price of quantity demand fall despite less affordable. At the same time, quantity supply will increase despite more profitable bring about a movement up the supply curve from point A to C. The new equilibrium at point C will arise when the price continue to increase until the shortage is adjusted. To form a new equilibrium at point C, the equilibrium price of the food will increases from P1 to P2 and the equilibrium quantity of the food will increases from Q1 to Q2. This can be clearly showed in the article that I had read. From the article, it view that there is a rise in the world population causing the price of the demand for food to double (Vidal, 2012).

                                                  Market for grains

The term of supply is the sum of goods or service offered for buying at any particular price. Supply can be determined by price where the sellers will try to get the highest possible price while the consumers will seek to pay the lowest possible price thus both paying at the equilibrium price when supply equals demand. The supply of cost of inputs is the lesser the input price the greater the revenue at a price level and more goods and services will be obtained at that price. Besides, the other factor of supply is the price of other goods. The supply can be reduced by lowering the prices of competing goods and the supplier may change to more profitable commodities as their firm is facing a decrease in the revenue (businessdictionary.com). The quantity supplied of a good and service is the price that sellers willing to sell during a given time period at a particular price. The Laws of Supply states that the changes of the price of good will alter the changes of the quantity supplied and they are positively related when the other things remain constant. A supply curve can be illustrate by the Law of Supply which shows the relationship between the quantity supplied of a commodity and its price when all other factors on seller plan does not change. A change in supply can be influence by the determinant of supply on the selling plans except the price of the goods (McTggart, 2010). There is an increase in the price of grains in western country due to the state of nature. The western country like Ukraine and Australia face the problem of drought and heat waves causing the production of grains to reduce. The heat wave and drought with temperatures up to 38C until the crops were destroyed.  Therefore most of the grain prices have risen between 10% and 25% while the supplies of grains have fallen by 2.6% in year 2012 (Vidal, 2012). Extreme natural disasters such as drought had influence the supply to fall and the supply curve shift leftwards from S1 to S2. From the graph it shows that there will be a shortage between Point A and B at the original price 10. Hence buyer will be willing to spend more causing the price of grain to increase. As the price increase quantity demanded will fall as the grains are less affordable affecting a movement up the demand curve from point B to C. Besides there will be a movement up the new supply curve from point A to B as the quantity supplied increase too where it is more profitable to producer. The new equilibrium price will be form at point C as the price continues to rise until the shortage is adjusted. The equilibrium price will increase from S1 to S2 but the quantity falls from Q1 to Q2.

                                                       Market for grains

To sum up, the economy today is facing the problem of scarcity of food as the resources availableare getting lesser and lesser. Hence the supply of food has reduced but the demand for food is greater than the goods produced. As a result, the price of grain will increase. As the price rises, the firm will search for solutions to survive in the economy crisis.

References:

Anon (no date) Microeconomics, sciencedaily, Retrieved from http://www.sciencedaily.com/articles/m/microeconomics.htm


Anon (no date) What is Demand,businessdictionary, Retrieved from http://www.businessdictionary.com/definition/demand.html#ixzz2VMYuLdcV

Anon (no date)What is Supply, businessdictionary, Retrieved from http://www.businessdictionary.com/definition/supply.html#ixzz2VMrgkkxn

McTaggart (2010) Economics Sixth Edition, Pearson, p.55-73.

Parkin M. (2012) Economics Tenth Edition, Pearson, p.52-57.

Vidal J. (13 October 2012)Food scarcity: the timebomb setting nation against nation. Retrieved     from http://www.guardian.co.uk/global-development/2012/oct/14/food-climate-change-population-water