According
to an article (Star 20 September 2012, p2) with the title of challenging times
for Bernas, an industry observer said that any potential disruptions,
particularly in supply shortages or erratic upswing in global rice prices, will
put Padiberas Nasional Bhd (Bernas) on high alert to ensure the national rice
stockpile stays intact. Therefore, it will indirectly affect the supply and
demand and the elasticity to that good which is rice. It also will bring the
price change when there is a subsidy by government.
First of all, the quantity supplied in a market typically
responds to many influences other than price. The weather, the number and size
of farms, and a variety of other factors all influence. This article discuss
that the uncertainty in global weather pattern and climate change wreaking
havoc on food crops may lead to dwindling supplies. In diagram 1, assume that
the price is remaining the same; weather pattern may cause the decreases in
supply and shifts the supply curve leftward from 3 million tonnes to 1 million
tonnes. Kedah is the largest supplier of rice in Malaysia. Assume that there is
a raining season in October to December, farmer can’t afford to produce rice in
this certain period, and cause decreasing of supply for rice occur and shifts
the supply curve leftward. In the result, decreasing in supply for rice will
cause the equilibrium price of rice rises and the equilibrium quantity
decreases in market. This is shown in diagram 2, the equilibrium quantity
decreases from 3 million tonnes to 1 million tonnes while the equilibrium price
rises from RM34 to RM42. This will indirectly causes the restaurant selling a
plate of fried rice by a slightly higher price. Therefore, suppliers such as
Bernas has to make sure and stockpile enough rice for consumers in this certain
period of time as they can predict the raining season in Malaysia. Besides
that, another factor which can affect the sustainable production of rice is
also discussed in this article, that is arise of new rice pests and diseases
besides resource scarcity. This phenomena isn’t predictable. Bernas cannot
predict when is the rice pest arise and when is the disease occur. Therefore,
it also will cause decreasing of supply for rice in Malaysia. Assume that there
is a disease spread across Malaysia is due to arise of new pest in farm, all
the rice in farm have to be replant and this is seriously affect the production
of rice. Therefore, supply of rice will decrease and supply curve shift to the
left. In conclusion, Bernas must always stockpile enough rice for consumer so
that they can deal with emergency.
In addition, important advances include
mechanization through tractors, combines, and cotton pickers; fertilization and
irrigation; selective breeding; and development of genetically modified crops. All these
innovations have vastly increased the productivity of agricultural inputs. In
my opinion, in this situation, economic shortage will occur as the demand for
rice is excess supply for rice in the market. In this article, Bakry also said
that the rice they purchase is kept in the stockpile for five to six months. Therefore, Bernas should has an
adequate preparation of rice so that the demand for rice and the supply for rice
will meet at equilibrium in the market.
However, rice in Malaysia is considers as
inelasticity of demand when it is compared to other country such as China.
Inelasticity of demand can be defined as the elasticity is between zero and
one. This also can be illustrated by consumers are just slightly changing their
buying behavior. For example, as the price of the rice increase by 10% of the
equilibrium price in market, consumers are still willing to buy rice as rice is
the necessity food for all Malaysian. Therefore, as income of Malaysian
increase or decrease, there will be no affect to the quantity demanded for rice
and it is still remains the same. It is because rice in Malaysia is known as
necessity goods. Necessity good has poor substitutes and that is crucial for
our well-being. For example, when income of a consumer increase by 20%, he or
she will still buying rice no matter the price of rice is increase or decrease.
Besides that, factor which will affect the change in demand is also due to
population in a country. Assume that the price of rice is still remain the same
but population in Malaysia is getting bigger and bigger, demand for rice will
increase and this will shifts the demand curve to the right. Therefore, supply
for rice has to be increase so that there will be enough rice to supply for
consumers.
Moreover, subsidies are used to encourage
production. It is payments by the government to producers. When government paid
the subsidy, it helps to decrease the prices paid by buyers and increase the prices
received by sellers. Therefore, this will leads to producers willing to produce
more and also indirectly helps consumer to reduce their financial burden. This
article also states that the current prices are relatively stable at RM22 to
RM23 per 10 kg range while the government-subsidised rice costs RM18 per 10 kg.
In my opinion, Bernas have to keep rice in
the stockpile and make sure that rice is enough for supply to consumers in the
market. Bernas also have the responsibility to control the price of the rice in
the market; they cannot set the price neither lower than the equilibrium price
nor higher than the equilibrium price. It must be set at the equilibrium price
which is fair to them as a producer and also consumers. By the way, government
subsidies can also encourage producers make more production and also can help
poor people to reduce their financial burden. As a result, economy of Malaysia
will be control and stable.
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