Government Intervention in the Economy

Topic Government Intervention in the Economy 

Ethical consumers should be aware poor Bolivians can no longer afford their staple grain, due to western demand raising prices (The Guardian) Summary (2013) The appetite of countries such as ours for this grain has pushed up prices to such an extent that poorer people in Peru and Bolivia, for whom it was once a nourishing staple food, can no longer afford to eat it. Imported junk food is cheaper. In Lima, quinoa now costs more than chicken. Outside the cities, and fuelled by overseas demand, the pressure is on to turn land that once produced a portfolio of diverse crops into quinoa monoculture. Quinoa price falls dramatically (ABC) Summary (2017) Quinoa prices have fallen dramatically over the past four years, with the world’s two biggest producers now receiving just a third of the price they were in 2013. But it is now hoped by industry that the ‘superfood’ can establish itself as a more affordable and common household grain. Case study Although the price of quinoa in 2017 had fallen to 2013 levels, the Peruvian and Bolivian governments are somewhat concerned that the price of quinoa could dramatically rise in the near future. As such, both governments have appointed you as their economic advisor and have been tasked to write up a document which addresses the following: • Background overview of the quinoa market in Peru and Bolivia.

• Analyse the events that led to the rise and fall of quinoa price. You are expected to produce relevant diagrams to help in your explanations, which reflects these changes and outcomes. • Critically discuss the 2013 impact on the economic welfare of both local consumers and producers. (Hint: what is economic welfare?). • In anticipation of a sudden rise in the price of quinoa in 2019, you are asked to recommend two economic policies that may curb this price rise. When analysing, also consider the impact on the economic welfare of consumers and producers. While it is relevant to consider social and normative issues, your essay should focus on economic analysis and should address such aspects as consumer and producer welfare, efficiency, functions of market and government intervention amongst other things. In preparing for this essay you should read as widely as possible. As a first step you should read of to get a good understanding of the relevant economic theories. Note also that although this is primarily a microeconomic case study, you are free to consider relevant macroeconomic theories/issues where appropriate.

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