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Price Elasticity Of Rice Essay

866 Words4 Pages

Rice is a necessity good in majority of the world’s population, mainly in countries in Asia. Based on my Internet research, major countries that produce rice are China, Indonesia, Thailand, Myanmar, India, South Korea, Japan, Philippines, Bangladesh, Vietnam and Pakistan. 90% (worldfood.apionet.or.jp) of the production and consumption are in Asia, which means it is about 80% (worldfood.apionet.or.jp) of the world’s consumption and production. Rice is a necessity good. A necessity good is a good that is essential to human life and survival. Income elasticity of demand refers to the relationship between the consumer’s income and the quantity demanded, or ceteris paribus. When the consumer’s income increases, the demand for rice will also increase. This can be shown in graph 1 & 2.Some suppliers increased the expectation of the consumers and as a result of it the demand curve shifted to the right. Equilibrium (E2) is in between the price of top and bottom, which means supply, can be sold. When the price decreases below the equilibrium, when shortage occurs, suppliers can sell the old surplus. With the increase in demand, government will spend less money and small supplies will gain more profits. As shown in graph 2, when the income of consumer increases, the quantity demanded also increase. …show more content…

This can be shown in graph 3. There are many factors that affect the value of price elasticity of demand, examples are the more close substitutes there are the more elastic the demand will be because consumer has a substitute to switch to. Necessities have an inelastic demand. For lower-income countries, rice is a necessity because some has low price elasticity of demand. The proportion of a consumers’ income also affects the elasticity of

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