Explain two possible reasons, other than a change in income, for the rise in the price of food over the period shown

Extract B (line 1) states that ‘In recent years, food prices have risen faster than incomes.’ Explain two possible reasons, other than a change in income, for the rise in the price of food over the period shown. (AS-Level Economics Specimen paper, 10 marks)

A market is a place where buyers and sellers meet to exchange goods and services. Equilibrium price is where demand meets supply. Equilibrium price would change in a free market due to a right shift in demand or a left shift in supply.

One reason for an increase in price could be an increase in population (line 9, extract B). This would cause a right shift in demand, causing the equilibrium price to change, as shown below.

The diagram shows the price increased from p1 to p2. Demand is the number of goods and services that people are willing and able to buy at each given price. If population was to increase, there would be more people who need to buy food, regardless of the price level. That is why demand shifted to the right, causing equilibrium price to increase.

Another reason for an increase in price could be climate change (Extract B, Line 8). Changes in the weather is one of the factors that affects the supply curve. Supply is the number of goods and services (food in this case) that firms are willing and able to sell at each given price. If weather is bad it makes it more difficult for farmers or businesses to grow food, then at each price, there would be less food available on the market. This is because bad weather would cause productivity to fall, so there is less food produced per hour. Then, if costs of production increases, firms would supply less food for the same price point.