UK Food Supply Challenges in 2020

UK food supply challenges
in 2020
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Executive Summary
Food industry of UK has a complex operational chain which range from different arrays
that link producers to consumers. These dimensions are impacted by internal and external factors
present in the market. COVID-19 and Brexit are two such factors that impacted upon the market
in 2020. This report is aimed at observing the economic principles that are applicable to the
demand and supply of the food industry of the UK. Also, situation of market failure observed in
2020 in food industry is discussed to further throw light on the government intervention i.e. the
policies adopted by the government to address the condition of market failure and support the
industry. It was observed in the report that free forces of demand and supply interact in the open
competitive market of UK to determine equilibrium. However, external conditions forced the
situation of nonequilibrium. It was identified that there was need for strengthening the
infrastructure of the industry so that it can become resilient to future known and unknown threats
like situations forced by pandemic and Brexit. Therefore, till the time infrastructure is resilient,
all the short-term and long-term efforts taken by government will be taken as necessary but not
enough.
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Table of Contents
Executive Summary.........................................................................................................................2
Introduction......................................................................................................................................4
Task 1...............................................................................................................................................4
Supply Curve and movement of supply curve............................................................................4
Demand curve and movement of demand curve ........................................................................6
Market equilibrium.....................................................................................................................8
Shortage and surplus.................................................................................................................10
Task 2.............................................................................................................................................11
Principles of market failure.......................................................................................................11
Government policies to address market failure in food industry..............................................12
Conclusion.....................................................................................................................................14
References......................................................................................................................................15
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Introduction
Economics deal with the study of procurement and allocation of scarce resources in the
market and the various factors that are associated with it in both micro-environmental and
macro-environmental setting. To study these factors, forces of demand and supply forms the
preliminary basis. This reports aims to study demand and supply forces in the food sector. Every
industry is influenced by many internal and external influences that impact its operations. In
2020, biggest influence were made by the situations brought upon in the market by the policy
confusions created by unclear Brexit aided by COVID-19 induced disruptions and lock-down.
Demand and supply both saw changes which created the situation of disequilibrium in the
market. In absence of free market, this disequilibrium was not able to re-balance itself,
necessitating government to intervene. Thereafter, government brought various policies in
various manners to support both demand and supply side as part of public welfare.
Task 1
Supply Curve and movement of supply curve
Supply curve
Quantity supplied refers to the quantity of a commodity which a producer is ready to
offer on a definite price. According to Krugman and Wells, quantity supplied of a commodity
and its price moves in same direction i.e. when the price of commodity rises, quantity supplied of
the same commodity also rises. This behaviour is dealt under law of supply by keeping other
factors constant. Since, the price and quantity supplied moves in same direction, their
relationship is said to be direct and positive. This behaviour is illustrated by supply curve which
is graphical presentation of relationship among the quantity supplied and its price. It slopes
upward.
Movement along supply curve
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