Introduction
Rice is a staple food item consumed by billions of people daily. The product has numerous attributes that define its utility among different consumers. According to Custodio et al. (2019), the attributes can be grouped into three main categories: poor, good, or premium quality rice. Poor quality rice is denoted by having a firm, rough, dry texture, small broken grains, and impurities. Rice is considered good quality when it is round and fat when boiled, long and slender when raw and white, and has a uniform size and shape. The best quality rice features premium characteristics, including a good aroma, softness, a shiny appearance, and nutritional value, such as minerals and vitamins.
Rice can also be classified depending on its intrinsic or extrinsic attributes. The extrinsic attributes define the outer appearance of rice, such as labeling, packing, and branding. Intrinsic attributes define the grain quality of rice, such as softness, uniformity of shape and size, color, aroma, and purity (Custodio et al., 2019). These attributes are defined mainly within the entrenched historical, socio-cultural, and geographical contexts.
Substitute and Complementary Goods to Rice
In economics, goods can be classified as substitutes or complements depending on how closely they are related. Substitutes are goods that can be replaced or used in place of another and still be able to satisfy the same purpose. Mankiw (2021) states that substitutes have competing demands, whereby if the price of one good increases, the demand for the other good decreases.
Rice is consumed daily in our homes and restaurants, and the good can be substituted with bananas or corn. According to Mankiw (2021), complementary goods are products used together and have joint demand. Rice can be consumed alongside meat, chicken, and vegetables, which are complementary to rice. For instance, if the demand for rice increases, the demand for chicken will go up in homes that consume the two products together.
Normal Good or Inferior Good
A normal good is a product that will have a higher demand due to increased consumer disposable income. An inferior good refers to a product that will have reduced demand despite increasing consumer disposable income. Mankiw (2021) states that everyday goods can have a positive income elasticity of demand, while a negative income elasticity of demand characterizes inferior goods. Rice is a staple food, and its demand may not vary with the level of consumer income as there may be no immediate substitute. This means that if there is a substitute, an increase in the price of rice will reduce its demand; thus, it qualifies as an inferior good.
Non-Price Factors That Impact Demand for Rice
Non-price factors of demand involve the elements, other than price, that will cause the demand for a good to go up or down. The main non-income factor is disposable income, which defines consumer purchasing power. If consumers realize an increase in income, they may consume more rice and tend to consume less rice if disposable income falls, as it is a staple food.
The demand for rice can also increase or decrease due to the expectations people may have regarding the product (Mankiw, 2021). For instance, people may expect that the price of rice will change. An expected increase in price will cause the demand to go up as people may choose to buy more rice and stock it for consumption when prices go up. An expected decline in price may not have a significant effect, but some households may choose to consume less as they wait for the price to go down so they can eat more.
The increase or decrease in the demand for rice can be occasioned by the price of related products. In economics, products are related either as substitutes or complementary goods. Possible substitutes for rice include wheat and bananas, and a change in the price of a substitute will affect the demand for related goods. If the price of rice goes up, consumers may prefer to consume more wheat products, thereby reducing its demand. Complementary goods to rice include meat products such that if the demand for rice goes up, the demand for wheat will similarly go up as the two products are consumed together.
Even as rice is a staple product, its demand can be affected by consumer tastes and preferences. If people prefer to consume rice than any other product, its demand will definitely go up. The demand for rice can also be affected by the number of potential consumers (Mankiw, 2021). As rice is a food item, the expected increase in population will increase the number of potential consumers, which will cause a surge in demand for the product.
Non-Price Factors That Influence Supply of Rice
There are several factors, other than price, that cause the supply of rice to increase or decrease. The major non-price factor that will affect the supply of rice is the cost of production, which includes land, labor, and fertilizer, among others. An increase in the cost of production will result in a decrease in the supply of rice as farmers will produce less of the product. The quantity of suppliers is another important non-price element that will impact the rice supply. The supply of rice will go up if there are many suppliers of the product in the market.
The supply of rice might also change as a result of technology. The adoption of better technology in the production of rice will lead to an increase in the supply of the product (Mankiw, 2021). Future expectations can also influence the increase or decrease in the supply of rice. Suppliers may expect that the government will introduce taxes on rice, which will cause the supply to go up as taxes will increase the cost of business, which will lead to a future fall in supply.
Impact of Change in Demand on the Equilibrium Price and Quantity of Rice
The equilibrium price is the worth at which buyers are willing and able to pay for rice. Mankiw (2021) states that equilibrium quantity is the amount of rice that the suppliers are willing to provide at the prevailing price. An increase in rice demand causes the demand curve to shift upward, as illustrated in Figure 1. Consequently, the equilibrium price and quantity transition from point P to point O.
The equilibrium price and the equilibrium quantity will go up. If the demand for rice falls, there will be a downward shift in the demand curve, as shown in Figure 1 below. As a result, the equilibrium price and quantity will change from point P to point M. The equilibrium price and the equilibrium quantity will decrease.
Impact of Change in Supply on the Equilibrium Price and Quantity of Rice
The equilibrium price is the rate at which sellers are willing and able to provide rice as defined by the equilibrium quantity demanded in the market. The supply of rice may change due to any of the factors that affect supply, which will cause the supply curve to shift to the right or left. If the supply curve shifts to the right, as shown in Figure 2 below, the equilibrium price and quantity will move from point X to Y. In this case, the equilibrium price will go up due to a reduced quantity of supply. The equilibrium price and quantity will move from point X to Z if the supply curve moves to the right. This will lead to a reduction in the equilibrium price due to an increase in the quantity supplied, as shown in Figure 2 below.
Expected Demand for Rice
Demand for rice in the next five years is expected to go up, driven primarily by two factors. Given that rice is a staple food, the continued increase in population will cause the demand for the food item to go up (Bin Rahman & Zhang, 2022). The demand for rice will also go up due to the expected increase in incomes that will see people afford more quantity of rice.
Expected Supply for Rice
The supply of rice mainly depends on weather patterns and farming techniques. The weather patterns are affected by climate change, which will cause a reduction in the amount produced by farmers. According to Bin Rahman and Zhang (2022), shrinkage in the acreage available for farming will have an adverse impact on the supply of rice. However, the increase in demand for rice will necessitate governments to form favorable trade policies that will allow for the deployment of the latest farming techniques and technologies to ensure the population is fed.
Conclusion
Rice serves as a fundamental dietary staple, consumed daily by billions worldwide. Its significance is shaped by a variety of characteristics that determine its value among diverse consumer groups. These characteristics are primarily influenced by deeply rooted historical, socio-cultural, and geographical factors. The consumption of rice can be substituted by bananas or wheat, while its complements include meat, chicken, vegetables, and fish, among others. As rice is a staple food, it is considered a unique form of an inferior good.
Demand for rice can increase or decrease due to changes in income, the number of potential customers, consumer expectations, the price of related products, and tastes and preferences. Its supply can go up or down due to the cost of production, future price expectations, changes in technology, and the number of suppliers. The equilibrium price and quantity of rice can go up or decline due to shifts in the demand or the supply curve to the right or the left. The demand for rice is projected demand to increase in the next five years as the population and people’s incomes grow. The supply will be impacted by weather patterns and shrinkage in planting acreage, which may be corrected by better farming technologies.
References
Custodio, M. C., Cuevas, R. P., Ynion, J., Laborte, A. G., Velasco, M. L., & Demont, M. (2019). Rice quality: How is it defined by consumers, industry, food scientists, and geneticists? Trends in Food Science & Technology, 92, 122–137. Web.
Bin Rahman, A. N. M. R., & Zhang, J. (2022). Trends in rice research: 2030 and beyond. Food and Energy Security. Web.
Mankiw, N. G. (2021). Principles of economics (9th ed.). Cengage Learning.
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