RICE DEMAND



Question:

What are some factors affecting rice demand between developed and developing countries?

Answer:

Some of the factors affecting the demand for rice vary from country to country (developed and developing countries). For example, the availability of high disposable income in developed countries causes people demand to eat more rice while in the developing countries increasing poverty is a major cause for rice demand (Ritter et al 2008).

High disposable income means that people have a lot of extra money to purchase what they want. For example, in developed countries where disposable income is high, the ability to pay for rice is also high, when this happen more people demand for rice, thus rice consumption increases. Whereas, in developing countries where disposable income is low, people are likely to purchase less nutritious foods because they cannot afford them; thus, resorting to purchase and consumption of the main staples such as rice hence increasing its demand. Increase in the price of rice cause bring about reduction in the demand of rice in developing countries and a resort to available substitutes since increasing poverty will make it difficult for people to purchase rice. However, in developed countries, continued availability of high disposable income would lead to increased demand for more rice (income elasticity) (Hall 2011).

Additionally, increasing world populations has resulted in increased food (rice included) demand which leads to increased food prices (including rice) in world markets. The planet population is observed to grow faster than the production of food including rice. Further limitations to food production include things such as drought, bad weather and low inefficient food production and processing techniques. Consequently, with increasing demand for food by increasing world populations trailing food (rice) supplies, the price of rice has risen in the world markets (Time Business 2011).

Moreover, export restrictions of rice by leading rice exporting countries due to increasing domestic consumption has led to reduced supplies of rice in the world markets resulting in high prices for rice in the world markets (Hall 2011). Countries such as India and Vietnam have experienced increase local consumption of rice and were forced to restrict exports of rice to create surplus for its citizens. Therefore, the restriction of exports serves to reduce world supplies, which causes the existing rice suppliers to raise rice prices in world markets (Hall 2011).

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References

Hall, S (2011), Description of types of elasticity of demand, eHow.com, viewed 06 July, 2012, < http://www.ehow.com/info_8657018_description-types-elasticity-demand.html>.

Ritter, P, Addison, A, Horn, R, Overland, M, Rauhala, E, Robinson, S, Tedjasukmana, J &

Time Business (2011), A future of price spikes, Time Incorporated, USA, viewed 07 July 2011,< http://www.time.com/time/business/article/0,8599,2083276,00.html>.


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