2020/21 Trimester 2: Economics for Business - UK Food Crisis Analysis

This report provides an in-depth analysis of the UK food crisis of 2020, examining the interplay of economic principles and market forces. It begins with an executive summary and introduction, followed by a breakdown of Task 1, which explores supply, demand, market equilibrium, and the concepts ...Read More

Economics for
Business

EXECUTIVE SUMMARY
The report, as discussed follows contains a discussion over one of the most prominent issues
of the world at present, along with many other issues, that is Food Crisis of United Kingdom
triggered in year 2020. Food crisis that have been erupted in one of the most leading and
developed economies in the world is result of multiple factors. One of the main reasons in the
issue is the slowing growth and economic development in the economy. The slow growth even in
any one sector in long term leads to slowed growth in all other sectors as well, because all of
them are connected with each other and they support each other. Thus, if the Transport sector
growth is disturbed, than eventually, distribution of food products will be affected, and
consumers will not be availing their essential needs. Secondly, slowed growth leads in rising
Unemployment and declined income level of people. In the lieu of slower economic growth,
when business will not be functioning well, they shall start cutting jobs, too manage their
business expanses and ensure sustainability of businesses. As a result, incomes will decline and
people will not procuring food products and growth in the sector was getting revived. A vicious
trap therefore gets developed. While all these issues were the internal economic matter of United
Kingdom, COVID-19 and later the decision of UK government to exit European Union disrupted
the Supply of Food products more. All these issues have been discussed in the report, with
getting clarity and insights.

Contents
Economics for Business...................................................................................................................1
EXECUTIVE SUMMARY.............................................................................................................2
INTRODUCTION...........................................................................................................................4
TASK 1............................................................................................................................................4
Understanding Supply.................................................................................................................4
Understanding Demand...............................................................................................................7
Understanding Market Equilibrium and Aspects......................................................................11
Understanding Shortages and Surplus.......................................................................................11
TASK 2..........................................................................................................................................13
Discussing Principles of Market Failure....................................................................................13
Intervention by Government......................................................................................................14
Reflection to Government interventions....................................................................................15
CONCLUSION..............................................................................................................................16
REFERENCES..............................................................................................................................17
Books and Journals....................................................................................................................17
Online........................................................................................................................................17

INTRODUCTION
The report has attempted an efficient way of understanding Food Crisis of UK, 2020. The
discussion in report is carried and divided in two parts, Task 1 and Task 2. In task 1 report make
comprehension of crisis through aligning that with Economic concepts and principles, as
described by Krugman and Wells. In Task 2, there is a discussion in broader context of making
understanding of Market Failures in relation with Food crisis and interventions by Government
to help resolving the crisis, also an analysis of evaluation of usefulness of Government
interventions in made.
TASK 1
In order to get clarity of understanding about what were the exact issue that what the
circumstances were exactly, which led to failing of food products market in the United Kingdom,
it is necessary to develop an understanding from the basic studies of markets and market forces
of Demand and Supply (Lin, Lloyd and McCorriston, 2020). Also, their behaviour in relation to
the prices and fluctuations then are seen in market are needed to be discussed. The report in this
context has used Microeconomic concepts as described by Krugman and Wells. The efficacy of
these concepts in this regard is undoubted.
Understanding Supply
Supply of products means the quantity that the suppliers in market are ready to supply at a
given point of time and at a given price. In context of United Kingdom, the quantity supplied of
food products was seen varying at different point of times and at different range of prices.
Fluctuations that various developments bought to prices and supply of food products can be
understood through different aspects of supply (Brexit: Shortages and delays will grow says
supply chain reps, 2021).
Movement along Supply curve
Movement along supply curve is the phenomenon in which changes in supply is bought by
the prices. Supply increases with increase in prices, and decreases with the decrease in prices.
This is the general condition in market and existed before the Crisis of Food Scarcity erupted in
UK market (Toffolutti, Stuckler and McKee, 2020).

Figure 1: Movement along Supply curve
Rightward Shift of Supply Curve
In Rightward shift of Supply curve, Supply of products is seen increasing, not because of
increase in prices but due to other factors in market. In United Kingdom, this situation is
expected to happen once market overcomes the crisis. As demand is all time higher, but supply
channels are disrupted. Once these channels will open, supply will soon revive at the prevailing
prices.

Figure 2: Rightward shift of Supply curve
Leftward Shift of Supply Curve
This is the exact case visible in market of United Kingdom, where supply is decreased at
existing prices only, due to the force of other external factors in market such as declined income
of people, disturbed channels of distribution, COVID-19 and Brexit (Bell and Blanchflower,
2020).

Figure 3: Leftward shift of Supply curve
Understanding Demand
As described by Krugman and Wells, Demand of a particular commodity in market is
reflective of the quantity that consumers are ready to buy at a particular point of time and at
particular prices. In United Kingdom, demand of food products is very high. This is because the
essentiality that these products have in life and together the availability of products is scarce in
market, pushing prices much higher. The report has comprehended the positioning of Demand in
Food Crisis through various aspects related to demand (The British Government’s first disaster
of 2021? A food shortage, 2021).
Movement along Demand Curve
Movement along Demand curve is the positioning of demand of products in the market
during normal circumstances when demand is only seen affected by prices and no other factors
affect demand. With increase in prices, demand gets decreased and with decrease in prices
demand increases, leaving high affordability of consumers. This situation existed before the
eruption of crisis in UK market.

Figure 4: Movement along Demand curve
Rightward Shift of Demand Curve
Rightward shift of Demand curve is increase in demand of products due to external factors
beyond market forces, at the existing prices in market. In the UK market, this is the exact
positioning of demand, where scarcity of resources is increasing demand, resultantly prices are
being pushed but demand remains unaffected.

Figure 5: Rightward shift of Demand curve
Leftward Shift in Demand Curve
Leftward shift in Demand curve is decrease in demand due to external factors. The decrease
in demand because of this reason is expected to be seen, right after the eradication of crisis in
market.

Figure 6: Leftward shift of Demand curve

Understanding Market Equilibrium and Aspects
Market Equilibrium is that situation of market where every element of market and market
forces remains stable. The demand of commodities in market is matched by the quantity supplied
by suppliers and there are no positioning for crisis to occur. Therefore, it is clear from this
discussion that Market equilibrium at the time of UK food crisis was disturbed for sure. The
crisis that was triggered had this attribute that market forces in United Kingdom were not
allowed to be operational fully. At the Market equilibrium there is a pre-requisite that market
forces have to be operational fully freely (Nicola and et.al. 2020). It is then only when demand
would be pushing supply and they both will eventually bring a positive situation in market. But,
in United Kingdom intervention of suppliers, uncompetitive framework of administration and
various other factors like non-affordability of consumers have disturbed this stable condition of
market.
Equilibrium quantity- Equilibrium quantity is the quantum of products that is prevailing at the
time of Market Equilibrium. This is the quantity supplied, which is exactly demanded in market.
Equilibrium Price- Equilibrium Price is the price of products at which consumers have agreed
to purchase products and suppliers are ready to supply.
Understanding Shortages and Surplus
Both aspects of Economics, as discussed by Krugman and Wells, Shortages and Surplus are
attributes or can be called as result of disturbance in Market Equilibrium.
Shortages- Shortages of Products occur in market when the quantity demanded by the
consumers in market is higher than what suppliers are ready to supply. This is also called the
situation of Excess demand in market. This situation triggers the prices of products to rise and
the inflation is seen. This case was exactly reflected at the time of UK food crisis of 2020.
Surplus- Surplus in market is the situation of Excess Supply of food products in market. In this
situation, quantum of products supplied by suppliers is higher than what is demanded by
consumers. The case of Excess supply forces prices of products to come down in market, as the
consumers are not ready to buy at the existing prices by Suppliers have to maintain its revenue
(Spash, 2020).
Sooner or later, under the both conditions of disturbed market equilibrium, that is
Shortages and Surplus, equilibrium gets stabilised. This also happens only when Market forces

are left to operate freely. In the situation of Excess demand, when prices are pushed to rise,
suppliers will be obviously willing to supply more for earning more profits. The quantity of
products in market will increase and similarly, at the increased prices consumers will be
demanding lesser. Hence, supply will increase a little and demand will reduce a bit. Eventually,
at one point of Equilibrium quantity and Equilibrium price they both will meet each other,
Equilibrium will establish in market (Lombardozzi, Copperman and Auma, 2021).
Likewise, in the case of Excess supply in market, when producers will be supplying more
at a given price and there will not be any demand for procurement of products. Prices of products
are bound to push down. At the fallen prices, Consumers will start demanding more, the law of
supply will act and at the fallen prices Suppliers will supply lesser as they are incurring cost but
not gaining profits. Increasing demand and decreasing supply will meet each other at a point and
Equilibrium will establish in market. But, the condition is that market forces have to be allowed
to operate freely. Above made discussion is clear from following diagram.
Figure 7: Shortages and Surplus in Market Equilibrium

TASK 2
Discussing Principles of Market Failure
Market failure in economic terms means those circumstances where the economical
balance and Equilibrium of Market are clearly seen disturbing. The term of Market failure have
wider Connotations, and relates to many circumstances, that should not have happen but
happened due to wrong policies and decisions of Government as well as private entities. Failure
of these decisions leads to many heavy costs, which are ultimately fulfilled by People in society,
like seen in the case of United Kingdom Food Crisis of 2020. The cost which was paid by people
have proven very detrimental in way of food scarcity and insecurities travelling. Also, there was
inequitable distribution of food resources and products, where at large Private players are
responsible who were delegated the authority of ensuring proper supply of available products
and channelize supply in such manner for ensuing availability to the last man standing in the
line, especially weaker and vulnerable sections. But this was not seen and Private players were
seen favouring Elite classes more who were already in possession of resources in well-off
manner. The private players were acting as the agent of government. Government decided to
bring them in the loop of public good and welfare, for two reasons mainly. One, because they
were available with food products in their personal business capacity, like Supermarkets and
second because they have efficiently developed distribution system. Therefore, Government
thought their participation can help resolving the crisis quickly. But they failed market in
position that was worst than that existed earlier. Also, the Private players gained a sort of
Monopoly in market due to their selection by Government. As a result no other player was
entitled to come and help solving this crisis. Therefore, situation fell worsened and imperfect
competition in market got established. In this way Markets in United Kingdom failed (Fedotova
and et.al., 2020).

Intervention by Government
United Kingdom has a very resilient food supply chain and food products distribution
mechanism, which was not at all seen preferring to resolve the crisis. A separate stand by
government was required and in the light of this government prepared a separate committee for
bringing such changes responsible for solving the crisis and manager efficient distribution of
food products. Some of the interventions of government are listed below:
Quotas- Government started its intervention by ensuring reserves of food products to consumers
who fell in the sections of weaker and vulnerable populations of society. A special Voucher
schemes for children was bought which was to be administered by schools. Government had an
opinion of administering the supply through Schools was important because they will be
available with proper records of Students, who are in real necessity of food. A reserve voucher of
15 pounds per children in a week was made. Schools were left on their own to decide whether
they want to offer monetary benefit to students or will make Food packages available (UK
Government Emergency Bill looks to ‘keep food supply flowing’, 2020).
Government Transfers- Government transfers are monetary funding of government that is
launched in the process of direct action by the Government. A direct funding is beneficial to
solve the crisis in the roots of the problem, as government is not certain with all the facts of
issues of people. Thus, a monetary incentive can help being channelized in such manner which
the people want. A direct funding of 3.25 million pounds was given to Waste Resources Action
Programme. This was a programme developed by government to ensure food redistribution
schemes are getting channelized properly. A direct fund was to help this programme in meeting
any deficiency that arise at any point of time in distribution process.
Charities- Food charities in context of Government interventions to programme are necessarily
the one where Food packages are made available in direct manner. Also, through these charities
monetary benefits could be made directly available to targeted populations. The charitable
responses are not generalised but targeted. Here, in response of government the targeted
population was Older population of society. Through this, food parcels were distributed to these
population sections. Together, government wanted to ensure Nutritional security for this
population, and therefore required these parcels to contain all essential ingredients of good meal.
Availability of food parcels to this section was also critically important as elderly people were
undergoing compulsory self-isolation as required by government instructions.

Poverty programmes- Government quickly realised the problems of Homeless people as well.
Those people who are not having shelters on their heads are certainly not available with proper
food products as well. This is an obvious social situation of evident in most common sensible
way. The Government initiated a relief operation for these people. Somewhere, around 5500
homeless people, rough sleepers, were made available with houses and also food products. Food
and Housing is the basic necessity of a person and denying anyone of this is direct crushing of
their human rights.
Reflection to Government interventions
However, looking at the government interventions from a general and holistic point of
view enables one to comprehend that interventions were such that would have helped in solving
crisis best way possible. But this was not that had happened. In depth study of government can
clearly bring forward the fact that Government was totally unprepared to handle this crisis (How
COVID-19 have exposed inequalities in UK food system: The case of UK food and poverty,
2020). The deficiency and lacunas in government interventions can be noted as follows:
Quotas- The vouchers that were introduced for children revealed that the distribution of these
parcels had been patchy and insufficient. School managements in United Kingdom were seen
failing in addressing this distribution. Supermarkets through which supply was getting done
under this scheme were limited in geographical areas, and this limitation had not helped in
reaching to poor areas of United Kingdom.
Government Transfers- Funding made to Waste Resources Action Programme have not issued
the desired results that were required by them. The funding under this programme had fallen
handful to elite private companies. There was seen nexus between programme management and
large corporations. Also, this programme has not addressed structural issues that had been
required by people for emergency food relief.
Hence, shortcomings of UK food relief policy were very much evident. There are many
other shortcomings of governmental interventions as well.

CONCLUSION
From the above discussion it can be concluded that, Food Crisis of 2020, erupted in one of
the efficient economies of word, have left entire world in surprise. However, the crisis was not
an overnight incident. It was a result of various factors that have been gradually developing from
a long time and also the crisis existed at different levels at different intervals of time, as
understood by discussion in Task 1 of the report. The government interventions that were needed
the most at such time were also, making the situation worsened. Failure of government
interventions were mostly attributed to inefficient controlling mechanism.

REFERENCES
Books and Journals
Lin, H., Lloyd, T. and McCorriston, S., 2020. An Odd Crisis: Covid‐19 and UK Food
Prices. EuroChoices. 19(3). pp.42-48.
Toffolutti, V., Stuckler, D. and McKee, M., 2020. Is the COVID-19 pandemic turning into a
European food crisis?. European journal of public health. 30(4). pp.626-627.
Bell, D. N. and Blanchflower, D. G., 2020. US and UK labour markets before and during the
Covid-19 crash. National Institute Economic Review. 252. pp.R52-R69.
Nicola and et.al. 2020. The socio-economic implications of the coronavirus and COVID-19
pandemic: a review. International journal of surgery.
Spash, C. L., 2020. ‘The economy’as if people mattered: revisiting critiques of economic growth
in a time of crisis. Globalizations. pp.1-18.
Lombardozzi, L., Copperman, J. and Auma, C., 2021. Food Poverty and urban struggles during
COVID-19: the social reproduction of unequal London and the false narrative about the
‘pandemic-led crisis’.
Fedotova, G. V. and et.al., 2020, August. COVID-19 as a factor in the global food crisis. In IOP
Conference Series: Earth and Environmental Science (Vol. 548, No. 8, p. 082035). IOP
Publishing.
Online
Brexit: Shortages and delays will grow says supply chain reps. 2021. [Online]. Available
through: <https://www.foodmanufacture.co.uk/Article/2021/02/26/Brexit-shortages-and-
delays-will-grow-say-supply-chain-reps#>
The British Government’s first disaster of 2021? A food shortage. 2021. [Online]. Available
through: <https://www.theguardian.com/commentisfree/2020/nov/17/british-government-
food-shortage-uk-fresh-europe-ports-storage-space>
UK Government Emergency Bill looks to ‘keep food supply flowing’. 2020. [Online]. Available
through: <https://www.foodnavigator.com/Article/2020/03/19/UK-Coronavirus-
Emergency-Bill-looks-to-keep-food-supply-flowing#>
How COVID-19 have exposed inequalities in UK food system: The case of UK food and
poverty. 2020. [Online]. Available through:
<https://www.ncbi.nlm.nih.gov/pmc/articles/PMC7219559/>