Practise combining demand and supply to determine equilibrium, trace simultaneous shifts, calculate shortages or surpluses and explain joint demand, joint supply and price…
Distinguish between the concepts of market equilibrium and disequilibrium and show what happens in a free market for a good when disequilibrium exists.
The Fiji economy: a positive outlook
Fiji is a small island country in the Pacific with a population of 860000 . In 2014 its economy was reported to be continuing to grow steadily. It remained on course for a fifth consecutive year of expansion, boosted by high tourist arrivals and visible export earnings, particularly from sugar. The factors that were expected to restrict growth in 2015 included ongoing dry weather conditions causing lower output of agricultural goods, with the exception of sugar.
Table 1: Selected economic indicators for Fiji
Consumption remained strong in the first five months of 2014, and imports of consumer goods, mainly vehicles, rose by 15.6%. Personal remittances increased, boosting consumption expenditure.
The tourism sector - Fiji's main source of foreign exchange - continued to perform strongly. Visitor arrivals increased by 4.0% year-on-year, with 4.6% more visitors from Australia and 11.6% more from New Zealand, but there was a significant fall in visitor arrivals from Japan.
Sugar production increased, aided by government investments in new technology that improved efficiency of production and reduced price.
Despite higher growth, inflationary pressures were eased by declining international commodity prices. However, annual average inflation in 2014 was not expected to fall below 3.0%, as economic activity was expected to revive. In addition, continuing dry weather was affecting the food supply.
Despite the positive growth outlook, increased investment is needed to improve productivity and address supply-side capacity constraints.
Use a supply and demand diagram to show how the government investment referred to in the article affected the price of sugar produced in Fiji.
Palm oil is used in the production of many goods, including cooking oil, margarine, ice cream, soap, shampoo and more recently fuel for vehicles. It competes with other vegetable oils, made from soya beans, rapeseed, sunflowers and groundnuts. While palm oil production takes up 6 % of the land used for vegetable oil plants across the world, it produces 38 % of the total output of vegetable oil globally and accounts for 60\% of world exports of vegetable oil.
Palm oil is produced from the flesh of the palm fruit and, at the same time, palm kernel oil is produced from the kernel or seed. After the extraction of the oils the waste is turned into palm kernel cake that is then sold for animal feed.
In Malaysia the palm oil industry employs 570000 people of which 405000 are engaged in cultivation.
Table 1: Value of Malaysian Trade in Malaysian Ringgitt (RM) million
Malaysian palm oil production could hit a new record high by the end of 2013. Palm oil stocks rose to a peak in September 2013 as strong seasonal output outweighed rising export demand, lowering prices that had already fallen by about 5 % this year.
Forecasts of growing Southeast Asian output alongside rising supply of competing global oilseeds dragged the price of palm oil down by 3.5 % in September. Prices may fall further if the soya crop in South America is as good as expected. A lower price of soya beans for crushing into rival soya oil could take demand away from palm oil.
The strength of the Malaysian ringgitt could also continue to limit exports of palm oil. Indonesia, the world's largest producer of palm oil, will keep its export tax for palm oil at 9 %, while Malaysia has decided to keep a more competitive export duty of 4.5\%.
Analyse, with the aid of diagrams, the impact of an increase in demand for palm oil on the markets for palm oil and palm kernel cake.