Analysis of Production and Consumption in the UK Food Sector 2020

This report provides an executive summary and in-depth analysis of the UK food sector in 2020, focusing on the interplay of production and consumption. It examines the impact of COVID-19 and Brexit on businesses within the sector, exploring concepts like market equilibrium, shortages, and surpluses. The study investigates factors contributing to business losses, particularly those leading to consumer collapse in the food and beverage industry during the year. Furthermore, it discusses the government's initiatives to mitigate the economic challenges faced by the sector, including both short-term and long-term infrastructure improvements. The report delves into economic theories of supply and demand, market failures, and the measures undertaken by the government to address market imbalances. It highlights the shifts in supply and demand curves, the effects of market equilibrium, and the interventions implemented to stabilize the food supply chain amidst the crisis. The report also covers the challenges posed by changes in consumer behavior and the impact on local businesses, concluding with a review of government strategies aimed at supporting the sector during a period of economic uncertainty and disruption.

Economics For Business

Executive Summary
In a market economy, the consumers and producers combine to bring the market to
balance and maintain a balance. When the economy fails to reach equilibrium of its own, the
government steps in to maintain equilibrium. The purpose of such a report is to investigate
production and consumption powers in the UK food sector, with a focus on the year 2020. The
effect of COVID-19 and BREXIT on the success of the sector's companies was illustrated during
the year 2020. In addition, equilibrium point, shortages, and surpluses are addressed in the study
to assess their effect. The study also addressed business loss factors, with a focus on the factors
that would lead to consumer collapse in the food and beverage industry in 2020. Besides that, the
administration's attempts to save the sector from bankruptcy were discussed. These policies were
intended to provide both acute and long-term relief by improving infrastructure.

Table of Contents
Executive Summary.........................................................................................................................2
INTRODUCTION...........................................................................................................................1
TASK 1............................................................................................................................................1
Supply Economic theory.............................................................................................................1
Task 2...............................................................................................................................................7
Concept of market failure in food industry.................................................................................7
Measures taken by government to address failure of market in food industry...........................8
CONCLUSION................................................................................................................................9
REFERENCES..............................................................................................................................10

INTRODUCTION
Business Economics mainly handles the determination of different costs that business
firms incur. In this study consist of micro environmental setting, demand and supply forces
communicate in particular sector. Each sector affected by the market forces of market
equilibrium and become reason of disequilibrium in the market. The aim of the report to enhance
market interaction in the food industry of UK and factors considers Covid 19 and Brexit. This
report based on the UK food supply market. In this report consist of economic theory of demand
and supply applied UK food supply in 2020 and include basic examples. Moreover, discuss
economic principle of market failure as well as market intervention in supply and demand of
food related goods in UK economy 2020.
TASK 1
Supply Economic theory
According to Krugman and Wells, Supply is most essential market where represents
manufacturers side of operations in the market. Most of the products units are supplied after the
observation in normal market condition and mention the quantity of particular items that a
manufacturer ready to willingly sell in the market place. As a result most of the suppliers set
positive relationship with prices as with increment in prices. As a result they able to sell more
and achieve more profitability. There are identifying positive relationship between price and
supply that directly present by a curve that is known as supply curve. According to changes in
prices slop ship in left and right.
Movement along supply curve
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The supply curve based on the two variables that are represented by quantity supplied and
price. This movement reflect on the single supply curve with movement of supply curve. It is
movement because of increment in price, quantity supply moves, decrease in price, quantity
supplied moves down ward on the particular curve. For instance, in the year of 2020, increase
prices of Tomato that motivated suppliers to sell out more quantity.
Shifts in supply curve
Left shift: The supply curve change their position and shift towards left when determinates other
than prices decreases and creating another supply curve. Due to Corona Virus saw many changes
in food market in regard of supply chain that increased prices of raw material and leaving the
manufacturer to develop and supply lower quantities.
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Right shift: The supply curve change their position when determinates other than prices are
increasing. So it present as shift towards right and produce other supply curve. Such as, when
rising manufacturer, increase substitute to them. It modify them to manufacturer and supply
more.
Demand economic theory
According to Krugman and Wells, Demand is another market force that represents different
operational activities of market. Quantities demanded of particular item are analysed as per the
normal market situation after that quantity demanded in definite commodity in which customer is
taking interest to purchase product at higher prices that presents the negative relationship
between price as well as quantity demanded. It is presenting by the demand curve in graphical
manner that present relationship and had down ward slope.
Movement along demand curve
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Demand curve based on the two variables price and demand that has negative
relationship. The changes in these variables impact on single demand curve with particular
movement along the demand curve. When the prices is increasing that time quantity demanded
moves down wards and when the prices are decreasing so quantity demanded moves upward on
the same curve. Such as, vegetables market saw large demand of provisions at the time lock
down that impact on the demand curve because of changes in pricing. Along with started with
stockpiling that forced with particular supplies. Thus, it deducted demand levels of different
variables.
Shift in demand curve
Left shift: When different variables rather than prices impact in negative manner in
demand so it shift towards left. Such as, at the time of lock down increase rate of unemployment
and decrease income level of customers. As a result consumer to purchase low quantities at
particular price and pushing demand curves towards left.
Right shift: If distinct variables rather than prices increasing so it impact on the demand
curve and shift towards right side and make another demand curve. Due to COVID 19, people
aware in regard food and vegetables and prefer to eat healthy food that enhanced the demand of
particular items. It is shifted by demand curve at the right side.
Market equilibrium
Equilibrium evaluation, or calculating the optimum price and the quantity, can be done in
two ways: by concurrently resolving the algebraic expressions for production and consumption,
or by integrating the production and consumption curves in a fixed path and visually evaluating
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the equilibrium price. Equilibrium is the situation in which consumer market forces are balanced,
resulting in steady prices. In particular, an excess supply of products or services allows rate to
drop, leading to higher demand, while a scarcity or excess supply induces prices to rise, resulting
in lower demand. Market forces balance each other out, resulting in a state of balance.
As two powers of demand and supply engage openly in the economy, according to
Krugman and Wells, they communicate at a certain extent. This phase is referred to as the
commodity's market equilibrium. The price at equilibrium is known as the market equilibrium,
and the quantity that corresponds to it is known as the market equilibrium. For example, market
equilibrium for tomatoes is at 1.4 GBP with a quantity supplied of 600 in the graph mentioned.
Shifts in equilibrium
Change in supply curve- The demand curve shifts due to increases in consumer demand levels.
For instance, as shown in the chart above, consumption of coffee grew as more people sat at
home drinking coffee and during lock-down. As a result, there was an imbalance of
purchasing power of consumers. As a result, costs spike, influencing a greater range of
manufacturers to supply more goods. With a reactive rise in supply, the two factors will
engage in a different way, resulting in a new market equilibrium.
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Shortage and surplus
The relationship of buyers and sellers from one stage of quality and performance in the
market results in equilibrium. Imbalance in the economy occurs as these two powers make
excessive shifts to each other. The term "imbalance" can refer to a market condition in which
there is either an excess or a scarcity.
Surplus
If there is a shortage in availability of a product in the market relative to demand, a
surplus condition exists. To boost the condition, rates are lowered in order for demand to rise in
response. An equilibrium state point is reached as a result of this conservative rise in production.
For instance, in 2020, people's income levels fell, and as a consequence, their spending fell. As a
result, the industry is oversupplied. To preserve market equilibrium, the government provided
incentives to both customers and manufacturers, allowing suppliers to lower prices while
consumers would raise demand.
Shortage
A scarcity occurs when the market's demand for a certain product exceeds its supply. To
boost the condition, costs are raised, causing production to rise in response. A new equilibrium
point is reached as a result of this reactionary rise in production. For instance, competition for
fresh and organic vegetables and cereals increased in 2020. As a result, the economy experienced
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a shortfall or deficit. To rebalance the economy, the government set commodity quotas and
marginally increased prices to encourage citizens to legitimize their use. These interventions
increased supply while decreasing demand, resulting in a new equilibrium stage
Task 2
Concept of market failure in food industry
When the economy is either unable to allow free movement of market capital and is
unable to restore equilibrium, it is said to be in a failed state. When certain circumstances occur,
it is necessary for the government to act in order to protect the public's health. Since the BREXIT
agreement had not been completed by 2020, the UK food sector was still mired in policy
ambiguity. It was augmented by the effects of COVID-19, which both provided new problems
and prospects for business firms. The following are some of the obstacles that the restaurant
industry will face in 2020, which will result in business collapse.
Sudden rise in retail demand - People in the UK were so worried about the lock-down
that they began purchasing greater amounts of food goods to the point of restocking. The state
had not expected such a large rise in retail demand that it'd be able to threaten the food sector's
supply chain. Grocery stores announced vacant shelves, and the manufacturing process was
unable to replenish the inventory at the same time. This revealed flaws in the food chain chain's
system.
Change in buying habits - The food and beverage sectors have two market patterns: one
for processed food products, which is seen both online and offline, and another for new and hot
consumed foods and drinks, which is usually requested offline. Even so, due to the lock-down
and travel limits, the remainder of the demands gone digital. This resulted in a two-way problem.
One, a lack of distribution people made it impossible for companies to complete orders on
schedule, and another, local firms that offer hot meals, such as bars and pubs, found it more
difficult to thrive. Many of these companies appeared on the scene.
Food bank use - As the number of needy persons has increased, so has the number of
individuals who use food banks. Food bank consumers are those who do not have enough money
or social resources, and a rise in their levels means a reduction in the number of possible clients
for businesses. When production has already been interrupted, a drop in demand would have a
detrimental effect on industries.
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Measures taken by government to address failure of market in food industry
Various issues faced by firms in the UK food sector that contribute to market distortion
were listed and addressed in the preceding section. Since food is a must, the government must
take steps to shield the sector from collapse. It was determined that the sector needed not just a
short term boost, but also long-term infrastructure growth in order to be stable enough to face
potential challenges. The following are some of the government's initiatives to boost the UK's
food sector in 2020:
Market management - The government listed storing as one of the few items that could
be stocked before the shutdown, including noodles, drinks, and other grocery. The government
then partnered closely with the food and beverage industry to introduce two measures: first, to
improve the production process so that it can handle any increase in demand, and second, to
reassure the population by using social networks and other types of advisory advice to prevent
hysteria and food stockpiling. It has improved local stores, allowing them to diverge a significant
portion of demand away from supermarkets, ensuring that there are no vacant shelves and no
hysteria.
Taxation - Various regulatory limits on independent retailers and their vendors, such as
those imposed by antitrust regulation, have been eased in order to expand them ever further. It
also increasing VAT on food and hospitality companies to 5% to help them even more. It was
able to bring instant relief to major vendors by removing further burdens on them, as well as an
additional incentive for independent retailers to do company. This was also beneficial to
customers; however, relaxing should be checked on a regular basis to ensure that it does not
become beneficial to people in the long term.
Assistance program - The government recognized the difficulties encountered by local
merchants in the food and beverage sector, and as a result, it implemented a number of initiatives
and initiatives to assist them, such as the "Eat out and Help Out" programmed. Under this
program, the government encouraged people to go outside and eat at local restaurants and cafes
in order to help them recover. The government gave a rebate of up to £10 per individual on non-
alcoholic beverages to encourage people to come out to donate. This was a government-enacted
measure to offer emergency relief. To help companies that send internet orders to customers'
homes, the government relaxed the regulations governing driver hours, allowing them to reach a
larger number of individuals. Furthermore, Defra waived carrier bag charges for online
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purchases, encouraging companies to have the most no-contact shipping possible, enhancing
both customer protection and company quality. Take-out was promoted in order to address the
issue of labour shortages in distribution.
Other social welfare schemes- The government recognized the problem of a growing
number of people using food banks. To resolve this two-fold problem, the government partnered
with numerous food and beverage companies to supply them with food. The government
invested £16 million in organizations in such a manner that they pay corporations to deliver food
to socially disadvantaged individuals in collaboration with food banks and organizations. The
aim of such an initiative was to offer food to all while also assisting companies.
CONCLUSION
The above study examines production and distribution free markets and their
relationships in free market environments in order to describe the factors that affect them along
with the effects that those variables have. The food and beverage industry in the United Kingdom
was used as a backdrop, and the industry's success in 2020 was examined. The study concluded
that there are a variety of variables that affect commodity demand and availability, both
positively and negatively for companies. These causes also have a combined effect on demand
and supply powers, resulting in shortages and surpluses. Prices are modified to re-establish
equilibrium price under the segments and sub factors in order to restore the balance. As far as
macro-environmental factors go, numerous forces have been established that have an effect on
the market and may also contribute to its collapse. When the economy fails to reach stability on
its own, the government steps in to maintain the balance and ensure that social security is not
affected.
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REFERENCES
Books and Journals
Krugman & Wells 2017 EFB MOD3327 textbook
Online
Coronavirus and the impact on output in the UK economy: December 2020. 2020. [Online].
Available through:<
https://www.ons.gov.uk/economy/grossdomesticproductgdp/articles/coronavirusandthei
mpactonoutputintheukeconomy/december2020>
Disequilibrium. 2021. [Online]. Available
through:<https://www.investopedia.com/terms/d/disequilibrium.asp>
Shift in demand curve. 2021. [Online]. Available
through:<https://www.tutor2u.net/economics/reference/shifts-in-market-demand>
Shift in market supply. 2021. [Online]. Available
through:<https://www.tutor2u.net/economics/reference/shifts-in-market-supply>
Sixth Special Report, 2020. [Online]. Available
through:<https://publications.parliament.uk/pa/cm5801/cmselect/cmenvfru/
841/84102.htm>
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