Supply and Demand Assignment

Supply and Demand Assignment

Supply and Demand Assignment

Essence of the story
In the following assignment, the article related to “lowering down the price of Australian Wheat” has been taken. This article has been taken for the analysis so that the effect of various factors on the demand andsupply and demandof product could be understood in a comprehensive manner. This article includes the effect of price and quality of the product over the demand and supply of the product and also throws light over the impact of substitute products.
This article is been analyzed keeping the due interest of the farmers and the economy of the country as wheat contributes a great share in the economy of the country so it is required to take every possible action for ensuring good demand of the wheat produced in Australia. After the analysis possible recommendations will be given to the farmers so that demand could again be raised for better living and income.


Economic Analysis
The article that has been taken for the analysis reflects that the prevailing issue in Australia is the falling demand of the Australian wheat in the country itself. According to Workman (2017), Australia holds the top fourth position that generates maximum revenue out of selling of wheat (Workman, 2017). The revenue collected by selling of wheat account for $ 3.6 billion this states that wheat contributes a great proportion in the economy of Australia and thus considered as a significant resource of Australia (Workman, 2017). This sale has been fallen down by 47% from the sales of wheat in the previous five years. Because of the significant fall, it is required to analyse the exact reason for the appropriate solutions. For the stable prices, it is required to maintain a balance between the demand and the supply so that price does not need to be changed.

Figure 1: Grains production in Australia

(Source: Spragg, 2016)
The above diagram presents that the production of wheat has risen by almost 11% from the last five years this shows that the Australia is expanding its supply capacity to meet the increasing demand. But this increasing production results negative to Australia because the consumption and supply are quite less.
Figure 2: Local wheat consumption in Australia
(Source: Indexmundi, 2017)
The consumption of the wheat produced by Australia in Australia often declines because of the growing supply of the wheat from other countries. This shows that the demand for Australian wheat in Australia falls because of a large number of substitute products that are lower in prices and are competitive or higher in quality. The above situation throws light over the economic concept that the fall in the price of substitute commodity will result in the fall in demand of the primary of products as the buyers shift to purchase the substitute products (Suli&Xhabija, 2013). This shows that for attracting the customers, the Australian farmers are left with the only option that is to develop competitive characteristic in the wheat. This competitive characteristic could be developed by decreasing the prices and increasing the quality.
The demand and the price have an inverse relationship with each other that means higher the prices the lower will be the demand and the lower the prices the more will be the demand. This concept of economics could be understood by referring to the law of supplyand demand curve.
Figure 3: Relation between price and demand
(Source: Managedstudy, 2016)
The law of demand states that the price and demand will have inverse relation only till the price of substitute product will remain unchanged. Otherwise, with the fall in price, the demand for the primary product will decline at the constant price also (Suri, 2012). Because of the great substitute impact of rice produced by USA, Canada, and other countries, the demand for Australian wheat falls as the prices are high and quality is less. Thus to again restoring the demand, the prices are to be lowered down and the best price could only be found by matching the production with the actual demand.


Figure 4: Identification of Appropriate price
(Source: Nipun, 2017)
The supply law states that with the fall in demand the supply is also to be decline so that a balance could be maintained. With the appropriate balance, the prices could be lowered down as the extra cost of building an inventory, safety needs, and precaution tools need not be invested. This concept of setting the price of a commodity through considering the balancing point of supply and demand curve is termed as Equilibrium. According to Hudson (2016), the price equilibrium states that the fall in demand will insist the farmers lower down the supply and by lowering the supply rate new price is to be setup so that high satisfaction could be delivered to the buyers (Hudson, 2016).
Actions recommended for the key players and policyholders
From the analysis of the key issue and above article it has been recommended to the farmers of Australia to lower down the pricesof the wheat so that competitive position could be held for a long period of time by the Wheat produced in the country.
It has also been recommended to the policy maker that is the government to impose some excise or import duty over the traders that import the Wheat from Ukraine, USA, and Canada that is lower in price and higher in quality.
The farmers are suggested to consider the equilibrium theory that will enable them to identify the best price that will deliver maximum satisfaction to the customers without making any loss to the farmers.
Support for Conclusion
The conclusion that has been drawn is to lower down the price and improve the quality of the wheat so that the buyers could again be attracted and the demand of the Australian wheat in Australia could be increased. The above analysis supports the conclusion as the above analysis states that the demand of the Australian wheat is falling because of the lower price substitutes are present in the market. The above analysis shows that the customers have a tendency to buy a product that offers high utility in low price thus Quality improvementof the wheat is also mandatory for sustaining the competition.
References
1. Hudson, R., 2016. Price rethink needed for Australian wheat to compete. [Online] ABC.Available at: http://www.abc.net.au/news/rural/2016-06-10/grain-price-drop/7498196 [Accessed: 7 December 2017].
2. Indexmundi, 2017. Australia Wheat Domestic Consumption by Year. [Online] Indexmundi. Available at: https://www.indexmundi.com/agriculture/?country=au&commodity=wheat&graph=domestic-consumption [Accessed: 7 December 2017].
3. Managedstudy, 2016. Law of demand. [Online] Managedstudy. Available at: http://www.managedstudy.com/micro/law-of-demand.htm [Accessed: 7 December 2017].
4. Spragg, J., 2016. Australian Feed Grain Supply and Demand Report 2016. Feed grain partnership. Pp. 6-42. Available at: http://www.sfmca.com.au/items/1093/FGP%20Report%20October%202016.pdf [Accessed: 7 December 2017]
5. Suli, D. &Xhabija, G., 2013. The Effects of the Price Change, on the Demand of Agricultural Products During Summer Time. European Journal of Sustainable Development, Vol. 2, No. 4, pp. 293-302. Available at: https://ecsdev.org/ojs/index.php/ejsd/article/view/99 [Accessed: 7 December 2017]
6. Suri, S., 2012. 7 essential exceptions to the Law of Demand. [Online] Preservearticles. Available at: http://www.preservearticles.com/201103104452/exceptions-to-the-law-of-demand.html [Accessed: 7 December 2017].
7.Workman. D., 2017. Wheat Exports by Country. [Online] Worldstopexports. Available at: http://www.worldstopexports.com/wheat-exports-country [Accessed: 7 December 2017].