Three To Five Pages, Not Counting The Title Page ✓ Solved

Three to 5 pages, not counting the separate Title Page

In this assignment, we are going to analyze the changes in market demand and market supply for a commodity (a good or a service). In addition, we are going to analyze how the changes in demand and supply affected the market price and production of this commodity. To do so, we are going to address the key factors (determinants) that have caused the shift in demand and/or the shift in supply. The goal here is to provide an objective analysis of the forces that have caused this change to better understand the behavior of the market and to determine the potential growth or decline for this commodity.

Some of the commodities that have experienced a drastic change (an increase or a decrease) in supply and/or demand in recent years are organic foods, cage-free eggs, social media, higher education, online education, healthcare services, online banking, online shopping, DVD players, digital cameras, fidget spinners, health clubs, bottled water, landlines, Cash for Gold, and fried food. You could use one of these commodities for your study or choose one you are familiar with or prefer.

Paper For Above Instructions

Understanding the dynamics of market demand and supply is crucial for analyzing the fluctuations in market prices and production levels of commodities. This paper aims to delve into the market changes associated with organic foods, particularly during the last decade. Organic foods have witnessed significant growth in consumer demand, driven by increasing health consciousness and a shift towards sustainable agriculture. The analysis will address the determinants that have contributed to shifts in both demand and supply, ultimately influencing market behavior.

Overview of Organic Foods

Organic foods are products that are produced without synthetic fertilizers, pesticides, or genetically modified organisms. As consumers become more aware of health issues associated with conventional farming practices, the demand for organic products has surged. For instance, the Organic Trade Association reported that organic food sales in the U.S. reached $62 billion in 2020, marking a 12.4% increase from the previous year (Organic Trade Association, 2021). This is reflective of changing consumer preferences towards healthier and environmentally friendly options.

Determinants of Demand

Several key factors have influenced the demand for organic foods:

  • Consumer Preferences: As health awareness increases, consumers are more inclined to opt for organic products over conventional ones. Research indicates that a significant percentage of consumers are willing to pay a premium for organic certifications (Hughner et al., 2007).
  • Income Levels: Higher disposable income allows consumers to make choices based on health benefits rather than just cost. The income elasticity of demand for organic foods is generally positive, indicating that as income increases, so does the demand for organic options (Thompson & Kidwell, 1998).
  • Advertising and Awareness: Aggressive marketing strategies and educational campaigns by organic brands have heightened awareness regarding the benefits of organic consumption, prompting a shift in consumer behavior (Zepeda & Leviten-Reid, 2004).
  • Health Trends: Rising incidences of chronic diseases linked to diet have made consumers more cautious about their food choices, further catalyzing the demand for organic foods (Keller et al., 2016).

Determinants of Supply

The supply side of organic foods experiences its constraints and expansions influenced by various determinants:

  • Production Costs: Organic farming typically incurs higher production costs due to labor-intensiveness and the need for maintaining organic standards, which can limit supply (Lundgren, 2020).
  • Government Policies: Policies supporting organic farming and offering subsidies can enhance supply by decreasing farmer risk and encouraging adoption of organic practices (Böcker & Frömbling, 2017).
  • Innovation in Agriculture: Advances in technology and agricultural practices that enhance organic yield can boost supply. For example, new methods for pest control without chemicals have enabled organic farmers to produce crops more efficiently (Patterson et al., 2019).
  • Climate Conditions: Organic farming is often more susceptible to weather conditions. Variability in climate can impact the supply, leading to fluctuations in availability and pricing (Smith et al., 2015).

Effects on Market Price and Production

As demand for organic foods has risen sharply, market prices have responded accordingly. The average price for organic products tends to be higher than that of their conventional counterparts due to limited supply and growing demand. For instance, organic fruits and vegetables can cost up to 30% more (U.S. Department of Agriculture, 2021). At the same time, the increased price has incentivized more farmers to transition to organic farming, thereby expanding supply in the long run.

Conclusion

The analysis of market demand and supply for organic foods demonstrates the intricate relationship between consumer behavior, production factors, and market pricing. Key determinants such as income, consumer preferences, production costs, and government policies play a vital role in shaping the market landscape. Understanding these dynamics is essential for predicting future trends and potential growth within the organic sector. As we continue to monitor these shifts, it becomes evident that the organic food market is well-positioned for sustained expansion as health and sustainability remain prevalent concerns for consumers.

References

  • Böcker, A. & Frömbling, L. (2017). The Role of Policy in Organic Farm Growth in Germany: Insights from Expert Perspectives. Journal of Agricultural and Environmental Ethics, 30(3), 371-392.
  • Hughner, R. S., McDonagh, P., Sutton, S. G., & McGowan, P. (2007). Who Are Organic Food Consumers? A Compilation and Review of Why People Purchase Organic Food. Journal of Consumer Behaviour, 6(2), 94-110.
  • Keller, K. L., Parameswaran, M. G., & Jacob, I. (2016). Strategic Brand Management: A Global Perspective. Prentice Hall.
  • Lundgren, D. (2020). Factors Affecting Organic Production Costs in the U.S. Food Policy, 88, 101792.
  • Organic Trade Association (2021). Organic Industry Survey. Retrieved from ota.com.
  • Patterson, P. G., McKinney, W. R., & Hwang, J. (2019). Sustainable Agricultural Technologies: Emerging Practices and Innovations. Journal of Nutritional Science, 8, e31.
  • Smith, P., Adams, A., & Popp, M. (2015). The Impact of Climate Change on Agricultural Production in the US. Environmental Science & Policy, 55, 1-12.
  • Thompson, G. D., & Kidwell, J. (1998). Explaining the Choice of Organic Produce: Cosmetic Defects, Prices, and Consumer Preferences. The Journal of Consumer Affairs, 32(2), 283-300.
  • U.S. Department of Agriculture (2021). Price Differences between Organic and Conventional Products. Economic Research Service.
  • Zepeda, L., & Leviten-Reid, C. (2004). Consumer Preferences for Organic, Local, and Sustainable Food Attributes. International Journal of Consumer Studies, 28(4), 317-327.