Factors of Demand and Supply in the Food Industry of UK in 2020

Economics for Business
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Executive Summary
Market forces of demand and supply interacts in a free environment to achieve
equilibrium and establish a balance in the market. When market is unable to achieve equilibrium
on its own, government intervenes to restore balance. This report aims to explore factors of
demand and supply forces in the food industry of UK with a specific reference to the year 2020.
Year 2020 was highlighted by the impact of COVID-19 and Brexit on the performance of the
firms in the industry. Further, market-equilibrium and conditions of shortage and surplus are
discussed in the report to analyse their impact. Also, conditions of market failure was discussed
in the report with specific mention to the conditions that lead to the market failure of food and
drinks industry in the year 2020. Furthermore, measures taken by government to bail out industry
from failing was discussed. These measures were aimed at providing both temporary relief as
well as permanent by developing infrastructure.
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Table of Contents
Executive Summary.........................................................................................................................2
Introduction......................................................................................................................................4
Task 1...............................................................................................................................................4
Market force of supply................................................................................................................4
Market force of demand..............................................................................................................6
Equilibrium analysis...................................................................................................................9
Shortage and surplus.................................................................................................................11
Task 2.............................................................................................................................................12
Concept of market failure in food industry...............................................................................12
Measures taken by government to address failure of market in food industry.........................13
Conclusion.....................................................................................................................................14
References......................................................................................................................................16
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Introduction
There are two forces in the market that determine its operations - demand and supply.
Every industry get influenced from these market forces. Externalities and determinants of
market forces impact the market equilibrium to cause disequilibrium in the market. When it gets
difficult for market forces to restore the equilibrium on its own, government intervenes in the
market to ensure stable market and public welfare. This report explores food industry of UK to
trace interaction of demand and supply forces in its to obtain its equilibrium. Further, external
factors such as Brexit and COVID-19 lay impact and influence situations that lead to market
failure such as in 2020.
Task 1
Market force of supply
Supply is one of the market force and as per Krugman and Wells, it represents producers'
side of operations in the market operations. Quantities supplied of a product are observed under a
normal market condition and refers to the quantity of a definite commodity that a producer is
ready to willingly sell in the market. Suppliers enjoy a positive relationship with price as with
increase in price, they will be able to sell more and gain more profit. Relationship between
supply and price is direct and is represented by a curve which is known as supply curve. It has an
upward and positive slope.
Movement along supply curve
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