2 Supply and Demand: Who gets food, housing, and work?
2 Supply and Demand: Who gets food, housing, and work?
Caroline Krafft
Who gets food? The role of markets
Yemen’s food insecurity is an enormous challenge to the wellbeing of Yemenis. In the last chapter, we examined issues of production and ownership of production in thinking about why so many Yemenis were going hungry and what we can do to solve hunger. In this chapter we will focus on how food is allocated within Yemen through markets. The World Food Program (WFP) goes to markets in different areas of Yemen to check on the prices of different foods in local marketplaces. Unaffordable food prices in local markets are an important part of the story of food insecurity in Yemen[1]—and the U.S.[2] In this chapter, first we will learn about the role of markets, including supply and demand. We will then turn to the forces that can shift supply and demand to think about how to make food more affordable. Finally, we will analyze the effect of price controls on markets, focusing on two specific topics: rent control in the housing market, and minimum wages in the labor market.
Demand: What people want
How much food do families want? The answer to this question is going to depend on a number of different factors that we will explore throughout the chapter, but we will start with the price of food. The price is what a buyer pays (and what a seller receives) for a good or service. In Yemen, the currency is the Yemeni rial, so the prices are, for example, 100 rials for a pound of wheat flour. How many pounds of flour a family wants will depend on this price. The relationship between the price and the quantity people want is called demand. It is possible to describe this relationship with a table, an equation, or a graph. In this book, we will focus on graphing demand.
Figure 2.1[3] shows the demand for wheat flour in Amran governorate (a governorate is like a state) in Yemen. On the x-axis (the horizontal axis) is the quantity, measured as thousands of pounds of wheat flour. On the y-axis (the vertical axis) is the price of a pound of flour, in Yemeni rials. The amount people want at a particular price is called the quantity demanded. At a price of 200 rials, the quantity demanded is 10,000 pounds (point A). At point B, when the price is 100 rials, the quantity demanded is 20,000 pounds of wheat flour. If the price rises to 200 rials, families will demand fewer pounds of flour. If the price drops even further, to 50 rials, they will demand more pounds of flour. This pattern occurs for a variety of goods: when the price goes down, people demand more. Likewise, if the price goes up, people demand less. This relationship is sometimes referred to as the “law of demand,” like the law of gravity. Graphically, this relationship is the downward slope of demand. Note that the whole curve is referred to as demand, while a particular point (such as point A) shows a price and quantity demanded.
Supply: What people can provide
Demand is just one side of the story of how