'Economics Internal Assessment Essay\r'

'The bind discusses the printings of a severe runoff in the beas of Thailand to the sift harvestingion. The rice production falls to 22 from 23 one thousand thousand metric tons. Supply is quantity of goods and function that divulgers atomic number 18 willing and fit to produce at a given hurt and time period. The decrease in add on of rice in Thailand is shown by the fol down in the mouthers represent: The graph above shows that the effect of flood in Thailand decreased the rice crop’s supply. The supply wander shifted to the left from S1 to S2, moving the equaliser stop from point E1 to point E2.\r\nThe equilibrium damage hence rises from P1 to P2 and the equilibirum quantity moves to the left by 1 million metric ton. The sum up in the toll of rice brought advantages to the estate. integrity of it is the extend in the hit tax income of rice producers. Rice is a goodness good where the wrong elasticity quest is inelastic. Price elasticity demand is the responsiveness of quantity demand to the change of outlay. inelastic refers the condition where the quantity demanded is less responsive to the change in price. The following graph shows an inelastic demand curve of rice market.\r\nAs the total of producer’s gain is greater than the total payoff of injury, the producer receives an advantage of higher tax revenue enhancement from the tragedy in Thailand. Total revenue is the result of the multiplication of the quantity interchange to the price of the product. Despite the advantage, the rise in price of rice has brought disadvantage to the customers. As the quantity supplied of rice is decreased, therefore they are unable to buy a bigger quantity of rice and as its price goes up it increases their portion of real income worn-out(a) on rice, as it is a fix food.\r\nThus, it results to the opportunity toll of decreased stay real income that could be spent on other goods. Opportunity cost is the cost of the best alternative good sacrificed when a choice is made. Due to opportunity cost, the producers of non- goodness products would then be harmed as the quantity demanded for their product falls and therefore their total revenue decreases. To survive, producers will raise the price and thence harm the consumers. Thus, a solution shall be made to avoid further loss of customers.\r\nOne of them is to defend a upper limit price of rice in the country. level best price is the price set up by the government below the equilibrium price in order to serving the customers, due to the high prices of certain commodity products. As seen on the graph, the maximum price is set at Pmax, below the equilibrium price of Pe. With the imposition of the policy, the customers are able to purchase rice at low price. However, with rice supplied at the maximum price, customers are demanding rice at point QD, magical spell the quantity supplied is at Qe, which leads to a famine.\r\n shortage is the excess dem and of goods and operate. In consequence, to satiate the demand of customers, nasty market superpower arise. Black market is a plaza where the product is sold illegally at a higher price than Pmax. The seller of the rice might also apply unfair practices to customers such as rationing, where the occur of product is shared equally among customers, creating bound of consumption. other solution to avoid shortage is to issue the supply of rice from overseas.\r\n consequence is when a country purchase goods and services overseas. The supply curve then shifts to the sort out and Pmax becomes the new equilibrium price, thus black market and rationing would not arise. though it would still bring disadvantage to the municipal producers of rice. The imported rice would be a new substitute good to the dear(predicate) domestic rice. The quantity demanded for locally produced rice will decrease and thus the total revenue of the local producer decreases.\r\nAnother disadvantage is the occurrence of trade deficit, because the country’s import increases and we assume the merchandise remains constant. Trade deficit is the negatively charged balance where the country’s import is greater than it’s export. Looking at the advantage given by maximum price solution, it is more(prenominal) beneficial for Thailand to increase the producer’s revenue instead than to prevent illegal practices. Thus, implying maximum price as a solution is more effective compared to importing supply of rice.\r\n'