Introduction

In 2009, according to World Bank, the global food prices had growing sharply since 2005, and it seemed to be continually rising. Therefore, in some poor countries such as Bangladesh, India, Pakistan and sub-Saharan Africa, people cannot afford the high food prices. World Bank has also reported that there are 36 countries where do not meet the demand of the standard of the food security, and 21 are in Africa. In India, government announced that the food prices already increased by 21% over a year; meanwhile lentils and sugar prices had increased by 30%.

i. Consider the rising food prices factors, and discuss these under demand side factors and supply side factors

Under the demand side, first reason for the increasing food prices is that the income of domestic people increases in both China and India due to rapidly economic growths. So the demand for normal good rises, such as food, particularly meat and grain. Also, grain is the composite good, which could not only be consumed by human, but also be needed to feed livestock. Therefore, the large demand quantities of grain straightly result in increasing grain prices. Food is also the necessity, so the food prices are inelastic. That means in spite of increasing food prices; the quantity demanded of food is still large. Secondly, bio-fuels are increasing being utilized in some countries such as The United State and parts of European countries. Consequently, the great quantities of grain are needed for fuel processing factories, which also increase the food prices.
Under the supply side, terrible weather conditions and shortage of grains in global grain stockpiles lead to the leftward shift of supply curve; meanwhile the demand curve shifts to the right due to increasing demand of food, so the food prices become higher than before.

ii. How the following factors have affected the market for