Activities Chapter 4


 Activity 1:
 Tracing the effects of economic parameter changes on the food situation

Show graphically (using Template 4A-1) and explain the effects of the following changes:

1. Expansion of the production potential, e.g. due to newly irrigated land or the introduction of
 new high-yielding varieties;
2. A major drought has occurred and affected production;
3. Decrease of production costs, e.g. due to technological improvements or the introduction of a
 fertilizer subsidy;
4. Increase of production costs, e.g. due to a removal of input subsidies or an increase in water
 fees for irrigation;
5. General economic and income growth;
6. Improvements in the marketing system, e.g. through institutional reform and improved
 performance of a parastatal marketing organization or privatization;
7. Change from a closed to an open economy case (e.g. through trade liberalization) in a
 situation where the world market price of grain are below the internal equilibrium price;
8. Further decrease of world market prices in the open economy case (no. 7 above);
9. Increase of world market prices above the internal equilibrium price;
10.The government fixes the market price at a level below the internal equilibrium price (closed
 economy case) or the world market/import parity price (open economy case);

on:
* the prevailing market price (where applicable);
* the volume of domestic food production and the size of the production deficit;
* the volume of the food supplies and the size of the supply deficit;
* the volume of food demand and the size of the demand deficit;
* the volume of food imports or exports (where applicable);

Assess the overall impact on the aggregate food situation of the country and in the case of
policy measure no. 10 further implications and complementary measures required in order to
maintain the market price below equilibrium price levels.


- 174-