Annex 1


as to the combined effects of the various factors on the food economy and the overall state of
food security.

We distinguished different types of food deficits and have seen that the effects of economic
parameter changes on both food supply and demand need to be considered simultaneously, in
order to be able to assess the impact on the food security situation. Changes in the volume of
food supply and demand and on the structure of food deficits can be induced by changes of
the market prices, by demand based factors (income and income distribution), by supply
based factors (production costs, factor prices, production technology, food imports), and/or
by changes in the performance of the marketing system which links both sides the producers
and consumers of the food economy.

As a general rule we can state that all factors inducing an increase of food demand and/or
an increase of food supply are likely to contribute to a reduction in existing food deficits
and to improved food security (and vice versa).

In our graphical model, the volumes of food supply and demand increase, and the supply and
demand deficits are reduced, when there is, as shown in Figure A-12,

* a right and/or upward shift of the demand curve, and/or
* a right and/or downward shift of the production/supply curve.

The new production/supply and the demand curves in Fig. A-12 cross at point C where all the
food requirements are met, hence food security is achieved. If the market is not regulated and
the price is allowed to move towards the new equilibrium price (p'), all types of aggregate
food deficits (supply, demand and market deficits) are eliminated at this point. (It is assumed
that there exist no price or market rigidities which prevent market prices from moving to new
equilibrium levels. If the latter were not the case, one or both deficits, in our example the
supply deficit, would not be completely eliminated, and, in addition, market imbalances
would emerge, see par. 1 above).

The analogous path of movements of the production/supply and demand curves towards
decreasing production/supply and demand, and widening food gaps, can be easily deduced.


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