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High Food Prices Cause for Concern

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Submitted By h3llANGEL
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The article “High Food Prices Cause for Concern” by Martin Khor discussed about the issue of food prices which hits the peak level in the world. This article is related to the one of the ten economics a principle which is the seventh principle: Governments Can Sometimes Improve Market Outcomes.
According to Mankiw (2009), the purpose of government to interfere the market is to promote efficiency or to promote equality. The market is controlled by the invisible hand. Invisible hand is a term used by Adam Smith to describe the free market which the market is guided by the invisible hand regulating the economy without the government interferes. However, the invisible hand does not always able to regulate the economy. At the normal situation, the invisible hand will allocate the resources into their most efficient uses. When the resources failed to be allocated efficiently, the situation is called market failure. Market failure occurs when the resources in the market are unable to allocate efficiently. At this time, the government will interfere with the market to reallocate the resources through certain measures. On the other hand, the invisible hand does not always ensure that resources are allocated equally. Therefore the government needs to interfere by implementing taxation system.
Based on the article, food prices are soaring high exceeding the previous peak level in mid of year 2008. According to the Food and Agriculture Organization, the food price index had increased up by 3.4% for the seven months. There are a few factors which lead to the rising of prices such as the increase in the population growth; the World Financial Crisis which hit the world in year 2008-2009 also affected the food prices and the weather condition which damaged certain countries’ crop production. As the food prices are soaring up high, government will eventually interfere with the

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