Below is some economics homework I have. I have answered the questions but I struggled with the answers could someone please tell me the correct answers so I can compare my answers with yours. Thank you all for your help
Read the following excerpts from the article “Sushi boom increases rice markets for Riverina growers” by Laurissa Smith published on 22nd April 2014 1and answer all the questions. You are expected to use graphs to explain your answer.
Sushi boom increases rice markets for Riverina growers
The growing popularity of Japanese cuisine in Australia is driving up demand for speciality rice in southern New South Wales.
While the Riverina and Murray Valley specialises in medium grain rice production, premiums on short grain Japanese style rice is helping to drive grower interest.
Earlier this month, SunRice announced a higher price for the 2014 Koshihikari crop grown in the region.
The company's chairman Gerry Lawson indicated it'll be calling on growers to increase the area planted to the variety later this year.
With markets in Canada, the UK, South East Asia, South Korea and now Russia, SunRice hopes the industry can triple production for sushi rice in the next three years.
Craig Young, the company's senior marketing manager, says its wants to improve the sushi experience from paddock to plate.
"We're researching and working across the whole business to make sure that we're always improving and understanding what our customers want.
"So we're working with some sushi chefs on understanding their needs and what they look for, so we can make sure we incorporate that into our process, whether that be in breeding, growing, milling or storing."
Peter Snell, senior rice breeder with the NSW Department of Primary Industries, is working on two new lines in the breeding program and says they're showing some promise.
1, Using the demand/supply model explain the change happening in the market for short grain ‘Koshihikari’ rice. Make sure you explain the equilibrating process on prices and output of the change.
2. Using the demand/supply model, explain the impact on prices and output on the medium grain rice market stemming from the likely response from rice growers? Make sure you explain the equilibrating process on prices and output of growers’ response.
3. Given your answer in question 2, and assuming the demand for medium grain rice is inelastic, use the demand/supply model to explain what will happen to total expenditure on medium grain rice stemming from producers’ response.
4. Assume the government is concerned about prices rising too high for consumers and decides to introduce a price ceiling scheme. With the aid of appropriate diagram show the effect of a price ceiling scheme along with the problems associated with such policy.
Koshihikari is a variety of short grain rice that is used in Japanese cuisine. The rise in popularity of Japanese cuisine increases the consumption of rice appropriate for Japanese food dishes. An example of this is an increase in demand of Koshihikari rice. When the demand of a product increases, for the same level of supply, the equilibrium price is higher. An increase in demand for short grain rice raises the market price for Koshihikari rice. Suppliers are now able to charge a higher price as is being done by SunRice.
An increase in the price of short grain rice makes rice farmers produce more of these varieties. The area of cultivation of medium grain rice decreases. As a result there is a drop in supply of medium grain rice; the supply curve shifts and equilibrium price goes up.
If the demand of a product is inelastic, the amount demanded of the product does not decrease as price increases. The inelastic demand for medium grain rice would increase the total expenditure of customers as they are now forced to purchase the same amount at a higher price.
The introduction of a price ceiling results in a decrease in supply. This happens as the profit made by producers is restricted, and there is no incentive for them to increase the total production. The reduced supply causes a shortage of the product. If the government were to impose a price ceiling on medium grain rice, it would result in a shortage of the same. Farmers with the option of growing either short grain rice or medium grain rice would choose the former as it can be sold at a higher price and a large profit can be made.